Natural gas continues the significant declines that began last week. We observed a small rebound after the rollover, but on Friday, gas prices resumed their fall due to new forecasts indicating a clear cool-down at the end of August and the beginning of September. Record-high gas production in the US and below-capacity exports, with a surplus, have allowed for a strong rebuilding of inventories, even with slightly higher-than-normal gas consumption. At this point, there is a chance that demand will fall below normal levels, which would allow for a further strong increase in gas inventories.
Temperatures in a large part of the United States are expected to be below standard at the turn of August and September. Source: Bloomberg Finance LP, NOAA
After a period of increased gas consumption by gas-fired power plants (middle chart), consumption is returning to average values, and there is a chance it could fall below the 5-year average, which would allow for a faster build-up of inventories in the coming weeks. Source: Bloomberg Finance LP, XTB
The price of gas has fully closed the gap that arose after rolling the September futures contract to the October one. The price is testing the recent local lows from August 19 and 20, which were the lowest levels since last November. If there is no significant rebound in demand or a drop in production, market participants will increasingly look towards the $2.5/MMBTU level, although forecasts have also appeared that gas could fall as low as $2 if the strong oversupply continues in the coming months. It is worth remembering, however, that the November contract (the one after the current one) is trading around $3.11, about 40 cents higher. Source: xStation5
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