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A move above $4.901 would signal a continuation of the rally, with the next major target at $5.627. On the downside, key support levels include a pivot at $4.322, followed by $4.132, which would indicate a shift in momentum. Additional support lies at $3.924 and $3.742, with the 50-day moving average at $3.654 serving as the primary level controlling the intermediate trend.
Is Weather the Biggest Risk to Bulls?
Forecasts for warmer-than-expected temperatures in mid-March are dampening demand expectations. Atmospheric G2 reported that the northern and western U.S. will see above-normal temperatures from March 16-20, reducing heating demand. Additionally, NatGasWeather noted that much of the interior U.S. will experience highs from the upper 50s to the 80s this week, contributing to weak short-term demand.
These mild conditions contrast with underlying supply concerns. BloombergNEF projects U.S. natural gas storage to be 10% below the five-year average by summer, while EIA data shows inventories are already 11.3% below their seasonal norm. Storage tightness remains a supportive factor, but without near-term cold, traders may hesitate to push prices higher.
Is Production Weak Enough to Support Prices?
Lower-48 dry gas production stood at 106.0 Bcf/day on Tuesday, reflecting a modest year-over-year increase of 2.7%. Meanwhile, demand fell to 77.2 Bcf/day, a 4.4% decline from the previous year. LNG flows to export terminals also dipped slightly to 14.9 Bcf/day. While production is not surging, the absence of strong demand leaves prices vulnerable in the short term.
Another bearish signal came from last week’s EIA report, which showed a smaller-than-expected storage draw of 80 Bcf, below both forecasts (-93 Bcf) and the five-year average draw (-94 Bcf). This suggests demand is failing to exert enough pressure to accelerate withdrawals.
Will LNG Expansion Drive Long-Term Support?
In a longer-term bullish development, President Trump lifted the Biden administration’s pause on LNG export project approvals, opening the door for increased natural gas demand. A Bloomberg report indicates the administration is close to approving the Commonwealth LNG export facility in Louisiana, which would add to U.S. export capacity and tighten domestic supply.
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