Natural Gas Prices Plummet Amidst Oversupply and Weak Demand

Natural gas futures have dipped to $2.78 per MMBtu, their lowest levels since late 2024, due to record production, elevated inventories, and limited demand. The market has faced steady pressure from these factors despite hotter-than-average summer temperatures. Technical analysis suggests that the price may continue to decline as oversupply persists.

Natural gas futures have dipped to $2.78 per MMBtu, marking their lowest levels since late 2024, driven by record production, elevated inventories, and limited demand. Despite hotter-than-average summer temperatures, the market continues to face steady pressure from these factors. According to the latest data, production from the Lower 48 states averaged 108.1 billion cubic feet per day in August, surpassing July’s record of 107.9 bcfd [1].

The Energy Information Administration reported a 56 bcf build for the week ending August 8, far above analyst forecasts and seasonal averages, indicating that supply is running ahead of demand. Inventories are now roughly 7% above seasonal norms, reinforcing the bearish backdrop [1]. Liquefied natural gas (LNG) exports have provided some offset, with feedgas flows averaging 16.2 bcfd in August, up from 15.5 bcfd in July. However, LNG demand has not been enough to fully balance the domestic market [1].

Technical analysis suggests that natural gas is trading at a crucial support zone around $2.75 to $2.80. A decisive break below this area could expose deeper losses toward $2.50, with psychological support near $2.00 also in play. On the upside, resistance is situated at $3, aligning with the 20-day and 50-day moving averages. Momentum indicators remain bearish, with the relative strength index near 36, close to oversold territory [1].

Looking ahead, weather forecasts are expected to guide sentiment in the short term. Models project hotter-than-normal conditions persisting into late August, which may provide temporary support for cooling demand. However, as summer transitions into autumn, the risk is that consumption softens while production remains strong, making the market increasingly reliant on LNG exports to prevent storage levels from climbing further above seasonal averages [1].

In other news, Black Hills Corp. of Rapid City, South Dakota (NYSE: BKH), which delivers natural gas to about 180,000 customers in west, northwest, and northeast Arkansas, is merging with NorthWestern Energy Group Inc. of Sioux Falls (Nasdaq: NWE). The result of the all-stock, tax-free transaction will be an electric and natural gas utility with a market capitalization of nearly $8 billion and an enterprise value of $15.4 billion [2]. The combined company will have more than 2 million customers across eight contiguous states, including Arkansas, and its headquarters will be in Rapid City.

The merger is expected to close in 12 to 15 months, subject to regulatory and shareholder approvals. NorthWestern shareholders will receive 0.98 shares of Black Hills for each NorthWestern share, implying a 4% premium. Black Hills shareholders will retain their shares. After the merger, Black Hills shareholders will own 56% and NorthWestern shareholders 44% of the combined company [2].

References:
[1] https://seekingalpha.com/article/4815787-natural-gas-price-dips-oversupply-weighs-prices-technical-analysis
[2] https://www.arkansasbusiness.com/article/black-hills-northwestern-energy-merger-arkansas/