The prices of contracts for American natural gas are experiencing declines as the latest weather forecasts indicate warmer-than-previously-expected temperatures in October.
Data released by the EIA indicates that the number of Heating Degree Days is expected to increase in the coming weeks, which theoretically should support price stabilization. However, this information was not enough to stop the wave of sell-offs.
This scenario raises concerns among investors about the level of demand for the commodity, as it may mean a delay in the start of the heating season in the United States.
During the transition from autumn to winter, the gas market is traditionally characterized by increased volatility.
This is due to significant uncertainty regarding weather conditions, which are a key factor shaping short-term demand. Any change in temperature forecasts can lead to sharp price reactions, especially in the context of low liquidity at the beginning of the heating season.
The current price drop may therefore reflect a short-term adjustment in demand expectations, but the market remains sensitive to further updates in weather forecasts. A cooler turn in the second half of October could quickly reverse the current trend.
An interesting aspect of today's session is the fact that such strong price declines are occurring even before the release of the weekly U.S. gas inventory data, which is scheduled for tomorrow. Typically, investors hold off on making significant moves until these data are known.
Source: Bloomberg Finance Lp
The Heating Degree Days (HDD) chart shows that the index has recently fallen below the average of recent years, confirming a reduced need for heating in the early days of October. However, it's worth noting that current forecasts for the coming weeks still remain slightly above the five-year average, suggesting that the market should not yet assume a sustained decline in demand for the entire season.
NATGAS (M15)
Source: xStation5
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