At the outset, it should be emphasized that a wider analysis of natural gas will be published next week. However, something is happening again in the natural gas market. Despite the fact that we are dealing with quite low volatility in the last 2-3 sessions, we witnessed a fairly strong pullback from around USD 3.3 MMBTU.
Today, the gas price is moving slightly higher, which is related to surprising data regarding the level of inventories. Although inventory levels for the current period are at their highest in many years, today we have a sizable reduction of 36bn cubic feet, while the market expected a reduction of 26bn, compared to the previous increase of 29bn cubic feet. The higher level of reduction itself is not as important as the fact that this was the first drop in inventories since April, when the heating season ended. This is what causes the price of gas to rise. However, what is currently crucial for the gas price?
- The weather is rather good, there are no excessive drops in temperature, resulting in lower gas consumption
- The lockdown in Europe will result in the cancellation of gas deliveries from the US
- The number of open positions for subsequent contracts is limited, which shows that we are not dealing with panic buying
- Still, the positioning is very high and extreme
- Seasonality shows several weeks of high levels followed by declines
- The forward curve for the next two months is relatively flat, followed by significant drops
As one can see, the number of open gas positions on December or January contracts is relatively low compared to previous months. Source: Twitter @BrynneKKelly
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Open real account TRY DEMO Download mobile app Download mobile appIf there are no weather-related twists, it can be expected that a price pullback will begin within the next 2 weeks, especially considering the fact that gas prices are at their highest levels in 2 years with significantly higher inventories levels. Source: xStation5
