The natural gas market has been absolutely hammered over the past 5 sessions with the winter 15, summer 15 and longer dated strips all falling to new all-time lows in today's trade.
Increasingly bearish near term weather forecasts and a surprising EIA weekly storage report withdrawal today that came in at 22 Bcf, roughly half pre-report estimates, dropped the January contract lower by another 4.1%. Today's losses come on top of a 5 day combined total loss of .740 or 17% for the spot market.
With natural gas prices in a weather market, it is not unexpected to see such volatile price swings. What is unexpected it to see sellers so aggressively pushing prices back to new lows ahead of the winter heating season. Yes, weather forecasts are bearish and today's storage withdrawal was near the lower end of estimates, but forecasts are just that and they can quickly change.
With most forecasts pointing toward bearish temperatures into the middle of December, the risk now is for a change back toward normal or below-normal forecasts. This is even more of a pronounced threat with the winter 15 contracts trading under the $3.700 level.
Trading in any market particularly commodities is never easy as prices can fluctuate wildly on borrowed leverage which only increases volatility. But with natural gas, it is the most volatile commodity. The market swings as witnessed over the past 6 weeks can be awesome.
It is going to be interesting to see how natural gas prices react pushing to new 2014 lows during December at the start of the winter heating season This could be a classic "bear trap" similar to late-October.
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