Natural gas prices increased by 0.31% to close at Rs 256.7, rebounding through short covering following recent declines attributed to expectations of reduced seasonal demand and milder weather conditions. Weather forecasts persist in suggesting a below-average cooling demand throughout a significant portion of the United States in the upcoming weeks, thereby constraining the necessity for heightened natural gas consumption. Simultaneously, the enhanced prospects for a U.S.-Iran agreement and the potential reopening of the Strait of Hormuz alleviated wider energy market apprehensions, thereby diminishing bullish sentiment throughout the energy sector.

Despite the modest recovery, the market continues to face pressure from unprecedented production levels and ample inventory conditions. Fundamental indicators persistently underscore a significant surplus in supply. In July, the average dry gas production in the contiguous United States reached a historic high of 110.7 billion cubic feet per day. However, gas flows to significant LNG export facilities experienced a decline, attributed to disruptions related to maintenance activities.

The Energy Information Administration reported a storage injection of 28 billion cubic feet for the week ended July 24, which fell short of market expectations that anticipated a 35 billion cubic feet build. Total working gas in storage rose to 3.084 trillion cubic feet, which is 1% lower than the level recorded last year, yet 6.4% higher than the five-year seasonal average, suggesting a favourable supply situation. The EIA also upheld a positive long-term perspective, projecting U.S. dry gas production to increase from 107.7 bcfd in 2025 to 111.2 bcfd in 2026 and reaching 115.3 bcfd in 2027.

Domestic consumption and LNG exports are anticipated to achieve unprecedented levels during the same timeframe. Technically, natural gas experienced short covering, as open interest decreased by 2.46% while prices increased. Immediate support is positioned at Rs 254.3, succeeded by Rs 251.9, whereas resistance is observed at Rs 258.9. A sustained breakout above this level could extend gains toward Rs 261.1 in the near term.