With more mild early winter weather on tap, and with storage refilling quickly, natural gas futures added to their recent losses in early trading Monday. Coming off a 39.9-cent sell-off in the previous session, the November Nymex contract was down 6.1 cents to $4.898/MMBtu at around 8:45 a.m. ET.
Plummeting futures prices reflect a market in the process of reassessing winter risks amid a combination of “surging gas production, blowtorch end-of-October weather and rising gas inventories,” EBW Analytics Group analyst Eli Rubin told clients early Monday. “Until the need for space heating demand shows up on weather forecast maps, Nymex futures may continue to struggle.”
Adding to the downward pressure on prices, there were no signs of any “notable volumes” flowing to either the Cove Point or Freeport LNG export terminals over the weekend, according to Rubin.
This comes as forecasts imply potentially five more storage injections in the offing from the Energy Information Administration’s weekly inventory reports, the analyst added.
“Collapsing global gas prices further narrow risk premiums,” Rubin said.
Entering the weekend, the temperature outlook was “about as bearish as it could possibly be,” according to NatGasWeather. Even after some heating demand gains in the European model’s projections, updated forecasts heading into the new trading week remained “exceptionally bearish,” advertising warmer than normal conditions through the first week of November.
“A minor bump in demand is expected Thursday to Saturday as a western U.S. system ejects across the Midwest, although still with underwhelming national demand,” NatGasWeather said. “…The start of November maintains a bearish setup, as most of the U.S. will be 10 to 25 degrees warmer versus normal, with highs of 40s to 60s across the northern U.S. and 60s to 80s over the southern U.S.
“It will take much colder weather maps for bearish weather headwinds to end, and we continue to look to mid-November for the next best opportunity.”
Meanwhile, from a technical standpoint, it remains an open question whether natural gas can continue to “shrug off the overextended condition,” according to ICAP Technical Analysis.
“It cannot do so indefinitely,” ICAP analyst Brian LaRose told clients ahead of Monday’s session. “So still focusing on our candidates for support and watching for any signs of stability.”
LaRose pegged key downside targets at $4.870, $4.716 and $3.600-3.536 for the expiring November contract.
“For December, the levels are $5.393, $4.870-4.820-4.716 and $4.108,” the analyst said.
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October 24, 2022 at 08:07PM
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Facing 'Bearish Weather Headwinds,' Natural Gas Futures Continue Retreat - Natural Gas Intelligence
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