After a strong rally in May, the natural gas market has shifted into a correction phase. Prices are under pressure due to high storage levels in the United States, easing concerns over LNG supply disruptions, and milder weather conditions in Europe.
The U.S. benchmark Henry Hub dropped below $3.2/MMBtu at the start of the week, while traders continue to take profits after the recent rally. At the same time, U.S. gas inventories remain about 6% above the five-year average, reducing the risk of a supply shortage during the summer period.
European market loses part of its risk premium
In Europe, TTF prices have also been under pressure in recent days. The market reacted positively to easing geopolitical tensions in the Middle East and the absence of new LNG supply disruptions. Additional downward pressure came from relatively weak demand and mild weather. Nevertheless, the situation remains tighter than a year ago: European storage levels are significantly lower compared to last year, meaning any supply disruptions could quickly bring volatility back to the market.
U.S.: supply surplus outweighs summer demand for now
The U.S. market is currently balancing between rising electricity demand due to heat and a persistent gas surplus in storage. The recovery of LNG export flows following maintenance work supports prices, but market participants continue to favor a “sell the rally” strategy. This suggests that traders do not expect a rapid emergence of supply deficits in the coming weeks.
Key market takeaway
The short-term outlook appears moderately bearish. The current correction is driven by comfortable storage levels and a decline in the geopolitical risk premium. However, the downside potential is limited in the medium term: new LNG export capacity in the U.S. continues to come online, while Europe still needs to actively refill storage ahead of winter. The base scenario remains range-bound trading with a bearish bias unless weather conditions or geopolitics introduce new bullish catalysts.
Near-term outlook
After another test of resistance near the $3.24 level, NATGAS prices are once again under pressure, with bears retesting support around $3.00, as I previously noted in Natural gas tests strong resistance amid demand recovery and LNG market risks. From this level, pullbacks toward $3.00–3.12 are possible, where selling pressure may re-emerge. A break below support would open the way for a decline toward $2.85–2.80.
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