Supply and Storage Dynamics for NG=F
Natural gas futures continue to grapple with ample inventories, with U.S. underground storage reported at 2,971 bcf as of July 25, standing 6.7 percent above the five-year seasonal average. The recent 48 bcf injection into stocks exceeded both the 41 bcf consensus and the 24 bcf five-year norm, underscoring the comfortable supply backdrop. Europe’s reservoirs mirror that abundance, holding 68 percent capacity as the region awaits the Hammerfest LNG restart and assesses output cuts at Norway’s Troll field, yet still trails its own 76 percent seasonal benchmark.
U.S. Production Surges Amid Record Rig Counts
Domestic output has vaulted over year-ago levels, with lower 48 dry gas flow at 108.1 bcf/day, up 3.4 percent, while the rig fleet expanded to 124 active gas rigs—the highest tally in two years. Baker Hughes data confirm a steady climb from September 2024’s 94 rigs, signaling producers’ eagerness to capitalize on supportive service costs. Concurrently, BNEF estimates LNG exports have lifted net flows to 15.2 bcf/day, marking a weekly gain of 2.3 percent and tightening the link between U.S. supply and global demand channels.
Cooling Demand and Weather Drivers
Despite robust production, a downturn in power-sector need has weighed heavily on prices. Aggregate gas-burn for electricity generation slipped to 76.1 bcf/day, down 13 percent from last year as high summer temperatures sweep through the Midwest and East but fail to reignite the deferred demand seen in spring. The Edison Electric Institute reports U.S. power output climbed 8.1 percent year-on-year to 98,772 GWh in the week ending July 26, yet this surge was insufficient to buoy NG=F from testing its key $3 floor. Forecasters still anticipate a mid-August rebound as cooling demand intensifies, but that upside remains contested by mounting supplies.
Technical Outlook: Testing the $3 Threshold
Natural gas has carved fresh lows near $2.97 this week, brushing against the ascending trendline drawn since May 2024 and anchoring around the long-term volume-weighted average price zone. Attempts to recapture the 20-day EMA at $3.25 and the 50-day EMA at $3.39 faltered, leaving NG=F drifting at $3.05 following a narrow $3.05 to $3.13 trading range. A sustained close beneath $2.97 would open the door toward $2.75 and even $2.50, while a break above $3.25 could validate a pattern reversal and invite a retest of the 100-day EMA at $3.35.
European Supply Risks and Geopolitical Factors
While U.S. fundamentals point toward oversupply, Europe braces for supply shocks. Constrained flows from the Troll field and delays at Hammerfest threaten to tighten balances as the continent’s import strategy pivots to U.S. LNG. Geopolitical undercurrents have intensified after federal tariff announcements threaten to reroute global trade flows, leaving buyers and sellers to navigate a rapidly evolving energy security landscape. Egypt’s push to expand LNG imports through 2030 adds a further structural layer of demand that may tilt trans-Atlantic markets.
Investor Sentiment and Market Positioning
Trading interest in NG=F remains subdued, reflecting participants’ skepticism early in the season when injection cycles dominate price action. Open interest and volume have shrunk since late June’s peaks, suggesting a wait-and-see stance until clearer signals emerge from storage reports and rig surveys. Net speculative length has eased, hinting that money managers are reluctant to commit heavily amid the dual pressures of rising supply and uncertain heat-driven demand.
