Upward momentum in gas prices lasted only one day

Gas prices rebounded sharply on Tuesday from the 3.1 level (monthly lows), but the upward momentum lasted just one trading session. After facing resistance at 3.5, prices entered a correction phase. Unless buyers regain control of the market, prices could quickly retreat to previous levels. While technical indicators don't rule out another rally attempt, the fundamental backdrop remains rather pessimistic.

Analysts surveyed by Reuters expect US gas demand to remain subdued in coming weeks. The heating season has ended across most of the country, while peak cooling demand has yet to begin. As a result, storage injections are proceeding at an accelerated pace, with inventories already 3% above the five-year average. Meteorological forecasts show no significant weather pattern shifts through June 6.

LSEG analysts anticipate a further decline in natural gas demand. They project US industrial and residential consumption will decrease from 99.4 to 94.9 billion cubic feet per day. Beyond moderate temperatures, this reduction stems from maintenance work at pipelines and LNG export facilities, whose feedstock requirements have dropped over 5% from April's record levels. Meanwhile, American gas production remains near all-time highs, showing only marginal decreases.

Eli Rubin of EBW Analytics Group forecasts robust natural gas storage injections in the US through at least early June, anticipating weekly builds of no less than 100 billion cubic feet. This trend will maintain downward pressure on gas market longs. If today's storage data again reflect substantial inventory growth, fuel prices may accelerate their decline.

The RSI indicator on natural gas' daily chart continues its downward trajectory after a brief pause, confirming traders' bearish bias and increasing the likelihood of a price retest of the 3.1 level.

Consider the following trading strategy:

Sell gas in the 3.3−3.4 range. Take profit – 3.1. Stop loss – 3.5.