The inability to overcome $3.107 will signal the presence of sellers. In other words, with the main trend down, traders will be in sell-the-rally mode. This could trigger a pullback into at least $2.819 and lead to further consolidation ahead of the $2.592 bottom.

Weather Drove the Move

The forecast models flipped and that is where this rally began. Hotter than normal temperatures spreading across the South and pushing into the East changed the demand picture overnight. Air conditioning load does not have to actually arrive for futures to move. Traders price what is coming not what is here. Above average heat across heavily populated regions in late May and early June was the signal and buyers did not wait for confirmation.

I’ve seen this pattern more times than I can count. Mild spring, strong production, storage building every week, short side getting comfortable. Then one model run shifts toward heat and the whole trade changes direction in a session. Last week was that session.

The Storage Number

85 billion cubic feet into storage for the week ending May 8. Close to expectations but not above them. That distinction mattered. All spring the market was worried that mild weather and record production were going to pile gas into storage faster than anyone could use it. The 85 Bcf injection said that story was not playing out the way bears had it drawn up. Demand was keeping pace with supply better than the short side expected and that was enough to pull buyers off the sideline.

Production

Dry gas production in the lower 48 states ran mostly between 108 and 109 billion cubic feet per day. Maintenance work and the low price environment earlier in the year pulled output back on some days. Production is still running stronger than last year out of the major shale basins but the softening was enough to keep the market from tipping into oversupply. Steady output meeting growing summer demand is the right setup for a rally to hold.

Exports and the Strait of Hormuz

Pipeline exports to Mexico held strong. LNG export flows took some temporary pressure from planned facility maintenance but stayed historically elevated overall. When the maintenance window closes that demand comes back and tightens the domestic supply picture further.

The Strait of Hormuz keeps adding a layer underneath this market that does not get enough attention in the domestic natural gas conversation. International LNG prices are elevated and U.S. export terminals are running near capacity filling the gap that Middle Eastern supply disruptions created. Every session the Strait stays restricted is another session overseas buyers have to look toward American LNG. That is not a headline. It is a steady bid and it stays in place until Washington and Tehran reach a durable agreement.

What to Watch

Weather decides this week. The heat forecast holds and power demand builds as summer approaches. It rolls back and June Nymex Natural Gas gives back what buyers fought for last week. The next Energy Information Administration report is the second test. Come in below 85 Bcf and bulls have their confirmation that balances are tightening. Come in above and the bears find their opening.

$3.107 is the wall. That is where the short-term range cuts in half and where sell-the-rally mode gets its first real test. Push through it with volume behind the move and $3.419 to $3.540 opens up. Stall there and the main trend reasserts itself. With the main trend still pointing down every session above $3.107 is borrowed time until buyers demonstrate they can defend it.