Natural gas trading outlook: futures slide on EIA report

Natural gas futures slid under pressure from a US report, which revealed natural gas inventories in the US logged another massive weekly build, continuing the longest run of bearish reports in more than 20 years.

Front-month natural gas futures for settlement in October on the New York Mercantile Exchange traded at $3.937 per million British thermal units (mBtu) at 14:32 GMT, down 1.91% for the day. Prices ranged from $3.935 to $4.027 per mBtu. The contract had added ~4% over the past three sessions, reaching a two-week high of $4.040 yesterday.

The US Energy Information Administration (EIA) reported the build at natural gas inventories for the week ended September 12th to be quite larger than expected at 90 billion cubic feet (Bcf), which was also the the lower end of analysts forecasts. The figure also represents the 22nd straight week of above-average injections and narrowed the deficit to the same-week 5-year average to just 13.3% at 2.891 trillion cubic feet of natural gas in storage. The series also logs the highest 20-week build in more than 20 years.

Despite the significantly bearish figures and relatively mild weather, futures refuse to let go of gains and remain stuck in range, as cold overnight lows light induced heating in places, setting off an early winter hype.

“There’s a lot of hype for another brutally cold winter over the eastern US,” NatGasWeather.com analysts wrote in a note to clients yesterday. “But if winter fails to deliver, we will be swimming in nat gas sooner than later.”

US weather outlook

A mild cool blast continues tracking through the Great Lakes and into the US Midwest and Northeast, keeping temperatures comfortable, killing much of any cooling demand and probably inducing some very light heating in the next few days. Meanwhile, the South will be warming as high pressure builds, which will eventually break into the North, heating the Midwest and Northeast later next week. The West Coast is experiencing a very hot few days ahead of moderate temps coming back by the weekend. Overall cooling demand across the US will be moderate-to-low for the next few days, with insignificant heating.

“By this weekend, much of the country will be experiencing temperatures in the mid-70s to mid-80s and very comfortable overnight lows,” NatGasWeather.com analysts wrote.