Natural Gas Market Analysis - July 11, 2025

Author: James Hyerczyk

Published: July 11, 2025, 12:21 GMT+00:00

Key Highlights

• Natural gas futures rallied by 3.83% following a bullish EIA storage report.
• Traders are eyeing a target of $3.574 as demand increases due to hotter weather.
• LNG exports have reached a two-month high, supporting domestic demand.
• Production levels have dipped below 104 Bcf/d, hinting at potential supply constraints.

Market Overview

U.S. natural gas futures experienced a significant increase, driven by a bullish storage report from the EIA and forecasts of hotter weather. The market is currently attempting to maintain levels above a critical pivot point at $3.362, with traders looking towards a potential target of $3.574. However, resistance is expected near the 200-day and 50-day moving averages, which are clustered around $3.795-$3.800.

EIA Storage Report

The EIA reported a storage build of 53 Bcf for the week ending July 4, which was below the anticipated 61 Bcf. This smaller-than-expected build indicates stronger demand and has contributed to the recent price increase. Current inventories are 6% lower than the previous year but remain 6.1% above the five-year seasonal average, suggesting that while supply is adequate, it is tighter than previously expected.

Weather Forecasts and Demand

Recent weather models have indicated a shift towards warmer temperatures in key regions, particularly in the West, which is expected to increase cooling demand from July 20-24. This change has revived bullish sentiment in the market, especially after earlier forecasts had predicted cooler conditions that had negatively impacted prices.

Additionally, electricity output has increased by 1% year-over-year, further reinforcing the demand for natural gas, particularly during peak air-conditioning season.

LNG Exports and Production Trends

LNG exports have reached a two-month high, with flows to U.S. LNG export terminals averaging 15.5 Bcf/day, a 4% increase from the previous week. This rise in exports provides additional support for domestic demand. Conversely, production in the Lower-48 states has decreased to approximately 104 Bcf/day, down from midweek highs of 106.3 Bcf/day, indicating potential supply moderation if the heat persists and upstream constraints develop.

Market Forecast

The near-term outlook for natural gas remains bullish, particularly following the EIA storage miss and the warmer weather forecasts. There is potential for a short-covering rally towards $3.574 and possibly $3.730 if the current momentum continues. However, traders should be cautious as rallies may face selling pressure near the resistance levels of $3.795-$3.800. It is advisable for traders to view these rallies as opportunities for tactical positioning, while being aware of the risks associated with short-covering in oversold conditions.

Conclusion

Overall, the natural gas market is experiencing a bullish phase driven by demand factors and supply constraints. Traders should remain vigilant and consider market dynamics carefully as they navigate potential price movements in the coming weeks.