Natural gas price plunged 8% on warm weather forecasts

Natural gas futures fell more than 8% on Thursday after EIA data showed much smaller-than-expected drawdown in inventories as the above-average temperatures cause that the demand for power-generation fuel is subdued. Stockpiles of natural gas in the United States decreased by 1 billion cubic feet in the week ending November 27 of 2020. Meanwhile analysts expected a decline of 12 billion cubic feet. In total, US inventories stand at 3.939 trillion cubic feet, up 343 billion cubic feet from the same time a year ago. They are also 290 billion cubic feet above the five-year average of 3.649 trillion cubic feet. Temperatures may be above normal in much of the Midwest and parts of the Northeast in mid-December, according to The Weather Company. Meanwhile U.S. natural gas price spread moved to negative territory today, which may suggest that investors do not see almost any prospect of a cold winter.

Gas for January delivery is now trading below February prices. Source: Bloomberg

Natural gas (NATGAS) - yesterday price broke below the 50 SMA (green line) which coincides with the upward trendline. The downward move accelerated after today's EIA report. Next support is located around $2.37 level. Source: xStation5

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