Natural gas prices traded down to a new 3-year low in today's session as the spot November 15 contract fell under the $2.400/MMBtu.
Weather forecasts for the next few days may be supportive for prices. But longer range forecasts into the month of December are looking decidedly bearish with December's forecast in particular predicting a late start to winter.
Weather conditions may change but what will not change is increasing storage which at 3,733 Bcf (billion cubic feet) should reach a new high during 2015. If upcoming storage injections replicate the past 5-year average, there will be 3,950 Bcf of gas in storage later this year surpassing the previous high of 3,929 Bcf from 2012. Tomorrow's EIA injection is expected to be 91 Bcf, in comparison to a 94 Bcf injection last year, and a 5-year average injection of 86 Bcf.
Weather forecasts are generally bearish into late-December limiting demand for natural gas and storage is approaching a record high. Both these variables have been widely discussed and are no surprise to the market.
Weather forecasts can obviously change and any hint of forecasts turning colder especially for December could instantly reverse the current slide in the market.
The EIA will release another weekly production number for dry-natural gas tomorrow. The EIA has forecast that dry-gas production will rise to 75.2 Bcf over the upcoming 6 months, a new all-time high. Recent data has run counter to this assumption as U.S. dry-gas production has been in a small decline from the 74.3 Bcf high reached in December 2014. Current production is estimated at 71.4 Bcf which is down 3.9% from the all-time high.
New lows were set today but only by a few cents. Whether or not follow through selling materializes over the next few days will be interesting to watch. It is when markets news looks overly one-sided such as it currently does in natural gas that price reversals can occur. There could be a classic "bear trap" forming in the natural gas market.
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