More of the same for the natural gas market. Domestic storage approaching an all-time high, check. Above-normal weather forecasts keeping natural gas demand limited, check. Weaker prices, a partial check.
Natural gas prices have been moving generally higher over the past week with the nearby November 15 contract gaining nearly 7%. But recent strength follows a large sell off which dropped the market to a new 3-year price low two weeks ago at the 2.400 level.
Short-covering and end-user buying were forces behind recent strength. This buying support may have run its course.
Another factor to consider which could become a bullish factor later this year is production which fell last week to 72 Bcf per day (dry-gas production). Production has been gradually falling from the 74.3 Bcf per day high set last December but has yet to actively decline similar to crude oil. The drop in U.S. crude oil production which is down roughly 500,000 barrels per day from June to a current level of 9.10 million barrels per day could also lower associated gas production which is a by-product of crude oil production.
The latest weather forecasts call for above-normal temperatures across much of the U.S. into late-October suggesting there will not be an early start to the winter heating season.
But none of these factors are new to the market and at some point will be factored into the price. Seasonally, a post-summer low should be near if it hasn't already been set.
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