Natural gas extends selloff as ample supply outweighs geopolitical risks
Natural gas remains under heavy pressure after a sharp selloff, with traders focusing on comfortable domestic supply despite elevated geopolitical tensions in the Middle East. The latest EIA storage report showed a 61 Bcf inventory build, exceeding the five-year average and increasing the storage surplus.
At the same time, maintenance at the Freeport LNG export terminal has temporarily reduced export demand, reinforcing the bearish near-term supply outlook.
Although hotter weather continues to support electricity demand across parts of the U.S., production remains robust enough to offset seasonal consumption. As a result, the market has shifted its focus away from weather-driven optimism toward persistently high inventories and solid supply growth.
Middle East tensions support global LNG market
The conflict in the Middle East continues to create uncertainty for global LNG flows, particularly around the Strait of Hormuz. While shipping conditions have improved compared with the peak of the disruption, LNG transit remains below normal levels, supporting European gas prices and keeping geopolitical risk premiums elevated. Meanwhile, the launch of LNG exports from Mexico's Pacific coast provides an alternative route to Asia that bypasses Hormuz, partially reducing concerns over global supply security.
Even so, these international developments have provided only limited support for U.S. natural gas prices. Domestic fundamentals continue to dominate trading, with strong production and healthy inventories outweighing the bullish impact of global LNG market uncertainty.
Technical picture points to sustained bearish momentum
The hourly chart shows Natural Gas breaking decisively below the $3.10 support area before extending losses toward $2.95, its lowest level in several weeks. Price remains below all major moving averages, while the sharp downward slope of the short and medium-term averages confirms that bearish momentum remains firmly in control.
Any recovery is likely to face initial resistance around $3.00-3.05, followed by the former support zone near $3.10-3.15. As I noted in the previous article, Natural gas consolidates as LNG demand offsets ample supply, the commodity's near-term outlook remains bearish, although short-term consolidation following the recent selloff cannot be ruled out.
As I noted in the previous article, Natural gas holds consolidation as geopolitical risks offset ample supply, Natural Gas remains vulnerable to further downside, although a deeper decline could begin to attract bargain hunters and generate renewed buying interest at lower price levels.
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