Natural Gas News: How Long Will “Sell the Rally” Dominate the Market?

Last week, natural gas futures settled at $2.329, up $0.010 or +0.43%.

Short-Covering Potential: A Temporary Reprieve?

The higher weekly close could trigger a short-covering rally in the near term. However, market analysts caution that sustainable price increases will require genuine buying interest rather than just short-term position adjustments. The current move appears to be more technical in nature than a fundamental shift in market conditions.

Bears Still in Control: The “Sell the Rally” Mentality Persists

Despite the unexpected higher close, the prevailing sentiment among traders remains bearish, with many still adhering to a “sell the rally” strategy. This cautious approach is primarily driven by persistently high storage levels, which continue to weigh on prices. While it’s typical for inventory levels to decrease during summer months, the market is more concerned about the supply levels at the onset of the winter heating season.

New Lows and Historical Context: A Sobering Perspective

Friday saw the August futures contract touch a new contract low of $2.249 before the late reversal. This price point, while a new low for the current contract, isn’t unprecedented in the broader context of natural gas trading. Previous futures contracts have traded even lower, reaching levels of $2.128, $1.907, $1.482, and $1.481. These historical lows serve as a reminder of the market’s potential for further downside, despite the weekly reversal.