Selling natural gas ahead of potential correction as demand-led rally fades

On Thursday, October 2, natural gas opened at $3.189, declining during morning trading after hitting its highest level since July. A recent rally to $3.231 was fueled by a sharp surge in short-term covering. This activity was prompted by revised long-term forecast models that now predict up to 17 more heating days, suggesting a potential rise in future fuel consumption.

While short-term weather is still warmer than average, curbing immediate demand, the market has already started preparing for a cold snap. According to Vaisala data, a winter front will move from the Midwest to the East from October 6–10, with Western states projected to see below-normal temperatures from October 11–15. As a result, investors have shifted their focus from present-day surpluses to potential gas shortages.

Prices also received backing from the expected slower-than-usual inventory build. The EIA consensus projects a weekly surge of only 64 billion cubic feet, a figure substantially lower than the five-year average of 85 billion. Despite current stockpiles remaining 6.1% above the seasonal mean, this points to an initial narrowing of the supply-demand gap. 

The European market, with inventories more than 82% full, also shows no signs of shortage, which reduces global competition for LNG. Since the positive weather catalyst has already been factored in, and physical supply is still ample, risks are now tilted toward a price correction.

From a technical perspective, natural gas has seen gains from its 2.768 low. However, current market dynamics suggest a developing correction. The Stochastic Indicator (5, 3, 3) sits at 73, close to the overbought zone, which could mean its shift to a downtrend. Moreover, the Chaikin Oscillator (3,10, Exponential) is still in positive territory, though its growth rate is slowing, confirming the chance of a near-term pullback once a local high is tested.

Take into account the following trading plan:

Sell at the current price or when it approaches $3.300. Take profit: $3.335. Stop loss: $3.520.

This forecast is valid from October 2 to October 9, 2025.