Natural Gas Update May 21, 2025

Overview

NG futures are slightly lower now after rallying earlier this morning, thus continuing the strong rally seen Tuesday. The watchwords used the past 24 hours for the rally are dip-buying, bargain hunting and short covering. Record natural gas exports to Mexico are also seen as supportive.

The notion of short covering is evidenced by the large drop in the June futures open interest seen on the CME from Tuesday's activity. Total open interest in NG futures fell by 18,860 contracts, with June down 22,890 contracts.

Comments seen from colleagues suggest some doubt as to the strength of the rally. "Natural Gas Prices Surge On Overdue Dip-Buying Despite No Significant Change In Fundamentals Or Weather;" "fundamentals stink, the weather is awful, production is to high, wind and solar are on a tear".

Several large options trades were noted in the LN/NG contract on the CME Tuesday. The June $3.25 put was actively traded.  The June $3.25/$3.00 put spread traded 5.3 cents with delta June futures buys at $3.37. The same $3.25/$3.00 June put spread traded 8.3 cents with June delta futures purchases at $3.25. The $3.25 put itself traded 8.8 cents with delta futures priced at $3.31. Large volume traded in the July $4.00/$4.50 call spread at 8.2 cents with July delta futures sales valued at $3.61. The January/February 1 month calendar spread options traded. The 25 cent/15 cent put spread traded 5.8 cents with a reference price for the underlying futures spread of 28.1 cents. The Jan/Feb spread settled Tuesday at 29.8 cents.

TTF prices have risen over the past 36 hours as Russia's inability to agree to a ceasefire with Ukraine puts supply concerns back in focus. Prices were also buoyed by an outage of uncertain duration at a gas field in Norway, as per WSJ reporting.  Kpler analysis sees TTF prices as range bound between 34 and 45 Euros. "The outlook remains range-bound due to relaxed EU storage targets and upcoming maintenance at key regasification sites. " Kpler says. Today's TTF June spot futures are trading near 37.7 Euro/Mwh ( =$12.53 /MMbtu).  (Reuters/NGI/WSJ)

Technically there is a gap to fill on the TTF DC chart from 40.500 to 40.840. Support lies at the 34 Euro area from recent price action.

Asian natural gas prices have also been steady at above $11 and gained 4% last week as more buyers waded into the market to replenish inventories as summer nears as per NGI reporting. The US/China tariff pause saw industrial sentiment improve and thus demand pick up last week. Some utilities and traders stepped in to pick up June cargoes, as per a Reuters source. "The market was not tight from a fundamental perspective, but lower prices have tempted some buyers who need to satisfy their contractual volume obligations.", the source added. In April,  China recorded its lowest LNG demand since October 2022, and was seen reselling U.S.-sourced LNG cargoes to Europe due to a tariff war with the United States. (Reuters/WSJ/NGI)

The JKM spot futures price for July on the CME settled at $12.515 on Tuesday. The attached chart suggests that the recent rally may stall as momentum for the JKM futures basis the DC chart is overbought.

Technically in NG futures, light resistance at the 3.499-3.500 area has been tested this morning with a high of 3.513. Above this resistance is seen at 3.576-3.583. Support is seen at 3.335-3.340, which is just below the overnight low of 3.346. Below that support is seen at the 3.260-3.270 area. Momentum basis the DC chart remains negative. But, as one colleague said : "you're not going to make any money getting short at $3.".

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This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

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