Natural gas prices continue to decline

While crude oil is one of the most boring markets right now, with the price soaring above $ 40 a barrel and stalling near pandemic highs, a lot is happening in the US gas market. We recently presented the fundamental situation and weather factors. The weather is still very good, which causes very little gas consumption for this period of the year. All this means that we are dealing with an extremely large increase in inventories!

 

Today's data showed that inventories increased by 31 billion cubic feet, with a recent increase of 8 billion. Despite a period in which we should already see a decline in inventories, they were expected to increase by 15 billion cubic feet. Therefore, it can be seen that even with a limited supply (lower production and lower imports), demand cannot cope. As a result, gas prices dropped by over 20% from the peak (even with a double positive rollover). Had it not been for the recent rollover, gas prices would have been trading around $ 2.5 per MMBTU.

Gas inventories have returned to their recent highs, although they are just slightly below the 5-year range. However, it can be seen that during the last year gas inventories have been falling for several weeks in the same period. We are currently seeing an increase in inventories. Source: EIA

The next rollover will take place in a month. Theoretically, the price of the next contract is very similar to the current one, but a lot can change. The seasonality indicates further declines until the middle of next month, that is, roughly until the next rollover. The nearest key support, besides the 2.5 level, is located around 2.4-2.45 area, near the local lows from the beginning of October. Gas remains heavily overbought by speculators who still expect the weather to worsen. November accounts only for 18% of the entire heating season, so one can see that a lot can still happen. Nevertheless, the fundamental factors indicate a further continuation of declines, at least in the near term. Source: xStation5

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