Natural gas fluctuates on weather forecasts but still way off October highs

Commodities

Weather trends continue to weigh heavily on US natural gas futures this week but shifting patterns could give Henry Hub a bump.

Natural gas trading

Shifting weather patterns confuse the markets

It was a poor weekend for natural gas prices. US gas futures fell to around the $4.749 level at their lowest on Friday afternoon.

Henry Hub futures have made their way back above $5 again, currently trading at around $5.151 as of Tuesday November 16th. However, they are still down 23% against October’s highs.

Weather outlooks continue to shift. That’s the nature of weather, I suppose, but forecasts have been pulling natural gas traders all over the shop recently.

At the start of the week, we were told that weather patterns were bringing unusually warm temperatures to most of the US. Now, the likelihood is cold Canadian winds, which were forecast weeks ago, are starting to finally sweep down into the continental United States.

Perhaps we should let the experts explain.

Natural Gas Weather states: “One weather system will exit New England, leaving behind chilly lows this morning of 20s and 30s. A second system is bringing rain and snow to the Northwest and Mtn. West with lows of 20s-40s.

“Most of the rest of the US will be mild/warm and dry w/highs of 60s to 80s for light demand. The system over the Northwest will track across the Midwest late in the week, while tapping colder Canadian air w/lows of 10s to 30s.

“Weather systems will continue across the northern US this weekend, while mild to nice elsewhere. Overall, demand will be LOW Tue-Thu, then MODERATE-HIGH late in the week.”

There’s quite a bit of uncertainty at the moment, so if you’re a gas trader, keep watching the skies for rain and snow in the US.

Rising US gas output may pressure prices too

US production floated around the 95 Bcf during the week ending November 12th – near to 2021 levels. What’s more, two more gas rigs came online during the last week too. US natural gas rigs are now at their highest levels since September 2020 at 102.

More US gas could be on the way – but we’ve got to keep watching the weather. Otherwise, the market could run into a high supply/low demand scenario, sending prices down again.

That said, stocks are still someway below the five-year average. The EIA’s inventory numbers for the week ending November 5th showed stocks were 308 Bcf less than last year at this time and 119 Bcf below the five-year average of 3,737 Bcf. For reference, inventories rose by 7 Bcf at this time for a total of 3,618 Bcf.

If the above scenario proves true, then the US could also turn some of that excess production towards export markets. Exports averaged 9.8 Bcf per day in October – an 0.3 BcF increase over September’s levels – according to the EIA.

Russia is already starting to let the gas flow to Europe and, if they prove steady, could eliminate the need for US LNG across Europe this winter.