Natural gas futures bounced back Monday from a value zone as extended September heat and robust liquefied natural gas demand provided support to the market. October Nymex natural gas futures traded at $2.921 as of 19:28 GMT, up $0.033 or 1.14% for the session, according to FXEmpire analysis. Early trading saw October futures drop to $2.832, holding just above the 50% retracement level before rallying back toward the 50-day moving average by late afternoon.
The contract reached $2.947 before pulling back just under the 50-day moving average resistance at $2.923. Temperature extremes across major consumption regions are driving the demand side of the market. NatGasWeather forecasts near-record temperatures across the South, East and East Coast through September 5, with readings in the 90s and 100s persisting across major power-generation centers at a time when cooling demand typically begins to decline.
Lower-48 gas demand reached 78.4 Bcf per day Monday, up 17.8% from a year ago according to BNEF data. Edison Electric reported that Lower-48 electricity output rose 6.1% year over year for the week ended August 22. Liquefied natural gas export flows are providing additional support.
Net flows to U.S. terminals reached 19.6 Bcf per day Monday, up 15.8% from the prior week. The Gulf Coast region is simultaneously burning gas for power plant cooling and pulling volumes for LNG exports following Freeport's return from maintenance. European storage levels sat at 64% full as of August 25, compared to a five-year average of 81%, maintaining robust demand for U.S. cargoes heading into winter.
On the supply side, production continues to run near record levels despite the market rally. Lower-48 dry gas production hit 114.6 Bcf per day Monday and touched 115.0 on Sunday, representing a 5.9% increase from a year ago. Baker Hughes reported the rig count rose by five last week to 132, marking a five-month high and approaching February's three-year high of 134.
The Energy Information Administration raised its 2027 production forecast to 116.0 Bcf per day from 115.3 in July, citing rising Permian associated gas output tied to crude oil production and climbing Haynesville volumes. Storage injections remain below historical averages. Last week's 15 Bcf injection for the week ended August 21 landed well below the 33 Bcf five-year average.
Working gas storage stood at 3,184 Bcf, down 1.0% from a year ago but still 5.5% above the five-year seasonal average. The EIA still projects inventories will reach 3,985 Bcf by end of October, which would represent the highest October storage level in 10 years and approximately 5% above the five-year average. From a technical perspective, the 50-day moving average at $2.923 represents immediate resistance.
Overcoming this level would position the market to challenge the main top at $2.990, which traders view as the breakout trigger that would reaffirm the uptrend. The main trend is up according to daily swing chart analysis, though conditions have been choppy. A short-term retracement zone has formed between $2.829 and $2.791, with Monday's test near $2.832 indicating constructive price action rather than short-covering rallies that typically burn out quickly.
Market participants will closely monitor Thursday's EIA report as the next significant data point. The extended heat forecast through at least September 5 is expected to maintain demand support, while LNG feedgas demand remains at its strongest pull of the year. European storage deficits heading into winter continue to support export volumes.
The demand narrative will remain intact as long as weather cooperates and feedgas demand stays elevated, though producers continue to drill into any rally with supply still setting the ceiling for price appreciation.
Source: fxempire.com