Natural Gas News: Futures Recover as Hurricane Risk Counters Warm Forecast

The Hurricane Rally Is Not Clean

November natural gas futures are higher Friday after Thursday’s storage-driven break, but this is not a clean weather turnaround. The market has a hurricane in the Gulf, some production shut-ins and a bounce off the 50-day moving average. It also has a warm forecast, enough gas in storage and a storm that can take demand away along with supply.

Buyers are trying to work the market back into Thursday’s failed rally. They have not done it yet. The $3.210 to $3.216 area is the first test. November natural gas futures traded as high as $3.236 Friday and could not stay above that zone. That is where the sellers showed up Thursday.

At 16:20 GMT, November natural gas futures are trading $3.206, up $0.038 or +1.20%. The market opened at $3.129, reached $3.236 and bottomed at $3.112.

Daily November Natural Gas Futures Technical Analysis

November natural gas futures are higher on Friday after posting a dramatic reversal top the previous session. Weather speculation drove the market to its highest level in two weeks, while a government storage report took back all the gains and then some.

The main trend is down according to the daily swing chart. A trade through $3.395 will change the main trend to up. A move through $2.912 will reaffirm the downtrend.

Front-month natural gas is trading on the strong side of the 50-day moving average at $3.045. This is preventing an even steeper sell-off.

The key focus today is trader reaction to the retracement-zone cluster at $3.210 to $3.216. The pair of 50% levels at $3.146 and $3.154 has become support. A sustained move over $3.216 would indicate the return of buyers. This could create enough upside momentum to test a 50% level at $3.264, followed by a 61.8% level at $3.291. The latter likely played a role in stopping yesterday’s rally at $3.298. A break back under $3.146 will put retracement-level support at $3.105 and $3.087 in play.

The Storm Is Taking Supply Off but It Is Taking Demand Off Too

Hurricane Isaias is the reason November natural gas futures are not falling apart after Thursday’s reversal. Offshore producers have shut in some production and evacuated personnel. That is enough to make shorts think twice about pressing the market after the storage number.

NatGasWeather expects small offshore production losses. The storm could also cut demand through power outages, flooding, shipping delays and weaker LNG flows. The forecaster says it is not taking much cooling demand away because temperatures were already comfortable.

The storm is keeping buyers interested. It is not giving them a one-way supply story to trade. The market needs a longer production outage. If the shut-ins are back in a few days, November natural gas futures are left with the same warm forecast and the same storage cushion that were there before the storm.

Thursday’s Storage Build Knocked Out the Weather Rally

Thursday’s 85 bcf build came in below the five-year average of 96 bcf. Inventories were below a year ago. The build was still above expectations. Storage remains above the five-year seasonal average.

Traders had already pushed November natural gas futures to $3.298 on storm speculation. The storage report did not give them a reason to keep paying up. The longs came out and took back the entire move.

The EIA is still looking for end-of-October storage near 3,985 bcf, the highest level in a decade. That forecast can change. It is why buyers are not treating every Gulf shut-in as the start of a new rally.

The Weather Forecast Is Not Helping

High pressure through October 14 across most of the country. NatGasWeather sees low demand over the next five days and only moderate demand late in the period. The forecast turned warmer through October 12. The models are not turning cold.

LNG flows and power demand are doing some work around the edges. LNG net flows were running near 19 bcf per day Thursday. Electricity output is above a year ago. The hurricane could interrupt both for a few days. That makes the storm a short-term event, not a reason to change the supply picture.

What to Watch

Thursday’s storage build and the warm forecast are what November natural gas futures have to trade after the storm passes. The hurricane kept shorts from pressing Friday. The $3.210 to $3.216 retracement zone is where the sellers showed up Thursday and again Friday at $3.236. Buyers could not hold above it either session.

The bias leans to the downside with the main trend down on the swing chart. The $3.146 to $3.154 support held Friday’s low at $3.112. November natural gas futures are sitting above the 50-day moving average at $3.045. That is what keeps the short-covering rallies alive inside a downtrend. A break back under $3.146 puts $3.105 and $3.087 on the chart. The storm has to keep supply offline longer than a weekend to change any of it.

More Information in our Economic Calendar.