Prices of US-focused natural gas futures slide into the red as warmer temperatures cool off weather-driven demand gains.

Natural gas trading

Natural gas prices fall away on changing weather forecasts

Henry Hub futures have not started the week especially strongly. Activity was already subdued across the weekend and continue to trade in a bearish pattern.

For instance, US natural gas futures were trading at a high of $5.756 on Friday 5^th November. As of European trading hours on the morning of Tuesday 9^th November, the price was around $5.386, down -0.36% on the day.

As ever, the price drop is down to changing weather patterns. A couple of weeks ago, traders were buoyed by reports that cold Canadian winds would start sweeping down soon, bringing sleet and ice, and general high demand for heating gas.

That is likely still the case in the long term. However, near-to-mid term gas traders are seeing warmer temperatures across much of the United States.

That said, the Midwest may see some snow and ice towards the weekend, according to Natural Gas Weather. But on the whole, demand will be low to moderate throughout the continental US.

Natural Gas Weather forecasts: “National demand will remain light through Friday as high pressure with comfortable highs of 50s to 80s expands across the southern and eastern US. The West will be cool and unsettled as Pacific weather systems track inland with valley rain and mountain snow w/highs of 40s to 60s, lows of 20s-30s.

“A chilly weather system will drop out of southwest Canada and across the Midwest Thu-Fri with rain, snow, and lows of 10s to 30s, then tracking into the East this weekend into the start of next week for an increase in national demand. Overall, national demand will be LOW through Friday, then MODERATE this weekend.”

US inventories data – gas stockpiles still fall below the five-year average

As we move into winter heating season, the US is still playing catch up as regards fresh inventory injections.

The EIA natural gas inventories report for the week ending October 29^th showed a build-up of 63 Bcf against the previous week. Total stockpiles came to 3,611 Bcf.

Stocks were 313 Bcf less than last year at this time and 101 Bcf below the five-year average of 3,712 Bcf.

Will the US have enough gas to keep it going through winter? With the advent of shale gas deposits, the US turned net exporter a couple of years ago, but tight global and domestic supplies mean it may have to look overseas for gas.

Gas production is actually up for another consecutive week. Baker Hughes has reported that more gas rigs have come back online too. Rig counts have been increasing for the past eight weeks.

According EIA reports, the US’ average total supply of natural gas rose to 99.9 Bcf per day for the week ending October 29^th. That represents a minimal increase of 0.1%. The energy agency also reported the vast majority of fresh gas was delivered via dry natural gas production.