Updated weather forecast weighs on natural gas

Natural gas (NG) prices keep trending upward after reaching an eight-week high of $3.092 per million British thermal units (MMBtu) on May 19. The rally was primarily driven by unusually hot weather on the East Coast, especially in Washington, which led to a surge in household and industrial energy demand.

However, everything changed in the blink of an eye. Just a few days ago, we were expecting a longer period of high temperatures, but the weather forecast was revised yesterday, promising some cooling across the region. Between May 24 and 28, most of the United States is likely to see average seasonal conditions. The NG market reacted swiftly: on Wednesday morning, prices entered a correction as investors started to adjust their expectations of short-term consumption levels.

There are also a few more bumps in the road ahead. Regular plant maintenance has pushed gas exports down to a four-month low, boosting domestic reserves, which are already 6.5% above the five-year average. Thus, a price ceiling has formed.

Moreover, the Middle East conflict remains unresolved, with the Strait of Hormuz now blockaded for twelve weeks—a chokepoint that handles nearly a fifth of global liquefied natural gas (LNG) supplies. These circumstances are quite favorable for the commodity market, as any local output disruptions in the US are instantly reflected in quotes.

An additional boost could come from positioning: hedge funds have built up their largest bearish bet in eighteen months, making the market vulnerable to a short squeeze if bullish sentiment persists.

From a technical standpoint, NG prices remain within a broader uptrend. However, they began to correct today, signaling overbought conditions. Another confirmation: gas is currently trading above the upper Bollinger Band ($3.022)—a sign of a potential pause in the rally. The Relative Strength Index (RSI) has recently touched extreme levels, setting the stage for a short‑term pullback.

Consider the following trading strategy:

Buy NG during the current decline, targeting $3.060, with Take profit at $3.200 and Stop loss at $2.960.

This forecast remains relevant between May 20 and May 27, 2026.