Natural gas tried to rally on Friday but continued to see a ceiling above.
Natural Gas
Natural gas tried to rally initially on Friday but gave back gains rather quickly as we continue to see a massive downtrend play out. That being said, we also have to keep in mind that there are a lot of different things going on at the same time. The futures markets of course are going to be a little bit more aggressive at times than the spot price. As we are looking at June in the futures contract, it suggests that we are more likely than not to continue to see a lot of questions about demand going forward. After all, June is typically a fairly quiet time of year for natural gas demand and as long as that is going to be the case it makes sense that price slumps.
Market Fundamentals and Structural Floor
In fact, if we get anywhere near the 50-day EMA or perhaps even the $3 level, it does make a certain amount of sense that there could be a lot of selling pressure there. Inventories are about 8% above the seasonal norms right now and mild spring temperatures have kept a lid on prices. The season at the moment normally sees lower demand before summer cooling demand kicks in.
That being said, there are production cuts out there as major producers like EQT have started curtailing output due to low prices with production falling to a 12-week low recently. The demand for liquefied natural gas exports coming out of the United States is at record highs proving that there is going to be a strong structural floor in this market as new terminals approach operation later this year.
While the immediate technical outlook is very cautious, the market is showing signs of a bottoming process which quite frankly happens this time every year anyway. The structural increase in liquefied natural gas demand and producer discipline does suggest that a tighter market could be the way forward in the second half of 2026. That being said, at this point, it is a market that is going to continue to look at $3 as a ceiling. I continue to fade short-term signs of exhaustion.