Natural gas prices surged higher on Tuesday in late day trade with the spot November contract gaining over .100 or nearly 3% on the session. The rally came after the November contract set a new contract low at 3.541 in earlier in the day.
Part of the rally may have been short-covering ahead of tomorrow's November 14 futures expiration or it could have been related to November 14 option expiration today.
But weather could also be a factor as short-term forecasts predicted the first hint of winter heating demand possibly coming in to the market later this week. The below-normal temperatures are not expected to last according to the latest 6-10 and 8-14 day NWS forecasts which predict above-normal temperatures across the entire lower-48 states into the first weeks of November.
Storage which is currently 3,393 Bcf is expected to climb into the 3,550-3,600 Bcf range before peaking which will leave the market under previous years' storage levels but well-supplied heading into winter.
Increased production which is estimated to be 3.3 Bcf per day higher this upcoming winter over last according to the EIA could add an additional 400-500 Bcf of gas into the market. This has been another bearish factor for the market in recent trade.
The market trend has been nearly straight down over the past 3 weeks as storage injections remain high and weather-related demand light. Storage injections during the first 3 weeks of October have been 26% higher then over the past 5 years. And this week's storage number could be another historically large injection.
The catalyst needed to reverse the downtrend will first need to be more bullish weather forecasts followed by an actual draw down from natural gas stockpiles.
If the natural gas market can continue higher over the next few days following today's bullish reversal, it might indicate the market focus is shifting from high stock piles and production to the possibility for another cold winter.
No comments:
Post a Comment