Natural gas waits for the cold winds to blow

Commodities

Last week, natural gas bulls were salivating at the thought of cold Canadian winds supporting prices through winter. Now it seems they’ll have to wait a little longer for bullish price action to return.

Natural gas trading

A subdued start for natural gas prices this week

Natural gas was trying to recover from losses made towards the weekend on Monday but instead slumped into the red. As of Tuesday morning, Henry Hub futures were in the green again, but it will take some time for price action to swing back up to the highs seen across September.

As of Tuesday morning, natural gas had gained 2.4% against Monday’s close. Henry Hub futures were trading for $5.340 at the time of writing.

A price slide in European gas, based on more Russian gas entering supply chains this winter, seems to have been matched by United States gas traders.

But this is natural gas. Weather sensitivities and patterns can make or break price action. Forecasts are all important.

Weather forecasts change blunting natural gas’ advance

Last week, it looked like natural gas prices could be going through a second spike. Meteorological reports suggested cold winds from Canada could be hitting the US soon – as far down as Texas – and that winter heating demand would skyrocket.

This is all still plausible in the mid-to-long term, but as it stands temperatures are fairly mild across much of the United States.

Well, it depends on who you ask really. Bespoke Weather Services said: “Warmer changes ruled the models over the weekend, with the changes coming after this week.

“A turn back warmer as we move into the middle third of November…generally looks to be on track. Given that we are into the time of year when weather becomes a dominant force in price action, this keeps things rather uncertain.”

Natural Gas Weather is leaning more towards more mild conditions, particularly in the eastern half of the US later in the week and early in the next.

It appears we’re still waiting for those forecast Canadian winds to surge down from the Great White North. That’s not to say they aren’t coming, but it appears the States will experience milder-to-warmer temperatures across the coming weeks.

A quick look at US stockpiles

As we wave goodbye to October and stub out the candles in our Jack o’ Lanterns we should be heading into winter heating season. November is traditionally when the switch occurs, but how much did the United States manage to squirrel away to tackle cold temps?

Working gas in storage was 3,548 Bcf as of Friday, October 22, 2021, according to EIA estimates. This represents a net increase of 87 Bcf from the previous week.

Stocks were 403 Bcf less than last year at this time and 126 Bcf below the five-year average of 3,674 Bcf. At 3,548 Bcf, total working gas is within the five-year historical range.

Not a good look when the US is meant to be sat on top of enough gas to last the winter. However, much of the United States’ production and transmission capability was shuttered earlier in the year due to the Texas Freeze and the again when Hurricane Ida tore through the Southern States. Soaring global gas prices also couldn’t have helped.

There are now 100 operational natural gas rigs in the US, according to Baker Hughes.