US natural gas price crashes amid high inventories and cooler weather forecast

US natural gas price hit November 2024 levels on Wednesday before rebounding slightly on early Thursday. Higher inventory levels and expectations of cooler weather in the ensuing weeks are set to continue weighing on the prices. However, EIA forecasts a tighter market balance in coming months as LNG exports increase. 

At the time of writing, the asset was trading at $2.85 per million British thermal units.This is after rebounding from the 9-month low it hit on Wednesday at $2.81/MMBtu. 

Fundamentals and technicals solidify US natural gas price downtrend

In its latest short-term energy outlook released on Tuesday, the Energy Information Administration (EIA) acknowledged the lower-than-expected US natural gas prices. Notably, it linked higher inventory levels to the downward pressure on prices in recent months. This has informed its forecast that inventories in the working gas storage will be around 2% higher than the 5-year average.

However, it expects higher LNG exports to fuel a tighter market balance in coming months; bolstering US natural gas prices. More specifically, EIA forecasts that the Henry Hub natural gas spot prices will surge from July’s average of $3.20 per million British thermal units (MMBtu) to $3.90/MMBtu in Q4’25 and $4.30/MMBtu in 2026. The US is the leading producer of natural gas, followed by Russia.

Even with the bullish outlook on a medium to long-term basis, higher inventories and cooler weather in the second half of  August are set to influence US natural gas price movements in the short term. Granted, meteorologists forecast above-normal temperatures to remain in the next two weeks. However, the heat intensity is expected to reduce; lowering the demand for air conditioning. 

Natural gas price technical analysis

Natural gas price chart | Source: TradingView

US natural gas price extended its previous losses to trade at its lowest level since November 2024 on Wednesday. While it rebounded slightly in early Thursday session, it remains on a downtrend. Indeed, it is on track to record its fourth straight week of losses with both the fundamentals and technicals fanning the decline. 

A look at its daily price chart shows the continuation of a bearish trend, defined by lower highs and lower lows. Besides, the short-term 25-day EMA has crossed the medium-term 50-day EMA to the downside to form the bearish death-cross pattern. With this, I expect the natural gas market to continue experiencing selling pressure atleast in the short term.  

However, at an RSI of 35, a corrective rebound is likely. As such, the range between $2.81 and $3.00 will be worth watching in the ensuing sessions. Further rebounding may have natural gas price face resistance at $3.09 as it remains below the 25-day EMA. On the downside, a move below the range’s lower border will likely activate the support level of $2.74.