Natural gas prices in US and Europe continue to fall amid inventory build-up
EIA report released yesterday showed US natural gas inventories increasing 111 billion cubic feet in the previous week. It was higher build-up than expected and also marked the fifth straight week when inventories increased by more than 100 bcf. Moreover, such a streak has not occured in the previous five years!
US natural gas prices may drop by as much as 20% this week. While NATGAS price is distorted by contract rollover, price of the previous month's contract is nearing $5 per MMBTu. Such price action is not in-line with seasonal patterns. Market chatter on improved weather, that will see the start of the heating season delayed, as well as looming economic slowdown are playing a major role in the sell-off.
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Create account Try a demo Download mobile app Download mobile appUS natural gas inventories have been building up quicker recently than suggested by seasonal patterns. In theory, we are now at the seasonal peak of inventory rebuilding. Source: Bloomberg
Generic natural gas contract is down almost 20% this week. It should be noted that in previous two such cases, strong declines were followed by another two weeks of 5-10% price drops. This could bring US natural gas prices below $5 per MMBTu mark. Source: Bloomberg
NATGAS launched today's trading higher due to contract rollover but one cannot rule out an attempt to fill in the bullish price gap and a move towards an upward trendline. As one can see, market got disconnected from seasonal patterns. Source: xStation5
What else is there to know?
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European natural gas inventories are 93% full
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European natural gas prices drops over 4% today and moves below €120/MWh
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US Freeport LNG terminal is expected to resume operations and exports in mid-November. This could in theory boost US prices but should also improve supply in Europe