May Natural Gas Contract 'Flirting With $3 Psychological Level'

In an EBW Analytics Group report sent to Rigzone by the EBW team today, Eli Rubin, an energy analyst at the company, said the May natural gas contract is “flirting with [the] $3.00 per million British thermal units (MMBtu) psychological level”.

“The May natural gas contract sank to $2.994 yesterday and closed at $3.016 - a year to date low,” Rubin noted in the report, adding that Henry Hub spot natural gas traded at $3.15 per MMBtu.

“While the $3.00 level may offer support, technicals indicate further weakness ahead,” Rubin warned in the report.

“However, maintenance on the Permian Highway pipeline could limit supplies to the Gulf Coast this week, sustained weather driven demand is possible into the weekend, and daily LNG feedgas nominations are up with recoveries at Sabine Pass and Plaquemines,” Rubin went on to state.

According to Rubin, fundamental catalysts aligning with the $3.00 benchmark could prevent further declines.

“Still, the emergence of storage surpluses and very weak spring fundamentals suggest deeper losses may continue,” Rubin said in the report.

“May-October contracts average $3.37 per MMBtu, and another 10 percent decline would put prices on a trajectory to reach the October five-year storage average of 3,753 billion cubic feet,” Rubin added.

“While the outlook for Cal 2026 increasingly appears underpriced, it could remain so for an extended period before eventually rising,” Rubin added.

In a separate EBW report sent to Rigzone by the EBW team yesterday, Rubin noted that the natural gas physical market was showing “signs of weakness”.

“The May natural gas contract flirted with the 200-day moving average at $3.21 per MMBtu repeatedly last week, but closed above the key benchmark every day,” Rubin highlighted in that report.

“As Henry Hub spot prices dropped below $3.00 over the weekend to a ten-week low, however, increasing bearish pressure may open the way for near to medium term declines,” Rubin warned.

“Further, support from last week’s cold is fading. By the end of week three, a 74 billion cubic foot storage deficit to five-year normals could flip to a 25 billion cubic foot surplus,” Rubin continued.

“LNG is softening at Sabine Pass. April production is almost 40 billion cubic feet per week higher year over year, although maintenance on Permian Highway Pipeline could limit supply later this week,” Rubin said.

Rubin went on to point out in that report that long-term contracts were “holding up relatively well”.

“Despite a 28.2 cent plunge in the May contract last week, 1Q2026 futures dipped 1.7 cents. Technical resistance may hold, but mounting fundamental pressure (triple-digit injections have not yet begun) suggests another leg lower over the next 30-45 days,” Rubin said.

The EBW team informed Rigzone that it did not publish an expanded edition of its report on Friday. In another EBW report sent to Rigzone on Thursday, Rubin highlighted that the May natural gas contract slid to a “fresh 10 week low”.

“The NYMEX front-month closed a hair under $3.25 per MMBtu yesterday, reaching the lowest levels since early February,” Rubin said in that report.

“Intraday trading again saw support at the 200-day moving average of $3.21 - but falling weather driven demand may continue to weigh on pricing. Henry Hub spot prices averaged $3.21,” Rubin added.

In this report, Rubin went on to warn that the outlook was weak over the next 30-45 days, “with projected triple-digit injections and a nascent storage surplus”.

“Forced selling over the past two weeks, however, creates a dynamic whereby longs are looking for signs of a firmer bottom to reestablish positions,” Rubin said.

“Winter 2025-26 gas futures already rose yesterday, for example, despite weakness at the front of the curve,” Rubin went on to state in that report.

The U.S. Energy Information Administration (EIA) boosted its Henry Hub natural gas spot price forecast for 2025 and 2026 in its latest short term energy outlook (STEO), which was released on April 10.

According to its April STEO, the EIA now sees the Henry Hub spot price averaging $4.27 per million British thermal units (MMBtu) this year and $4.60 per MMBtu next year. In its previous STEO, which was released in March, the EIA saw the Henry Hub spot price averaging $4.19 per MMBtu in 2025 and $4.47 per MMBtu in 2026.

The EIA projected in its April STEO that the Henry Hub spot price will come in at $3.93 per MMBtu in the second quarter of 2025. In its March STEO, the EIA projected that the Henry Hub spot price would average $3.88 per MMBtu in the second quarter of this year.

Source: Rigzone