Short Covering Held Friday, but the Storm Did All the Work
Natural gas futures were sharply higher on Friday and back on the strong side of the key retracement area.
Hurricane Isaias forced Gulf producers to shut in output and the market found buyers on the back of it. That gave the shorts a reason to cover going into the weekend after Thursday’s storage report nearly cracked the lows. The warm forecast through mid-October may be keeping the rally from running.
November natural gas futures settled at $3.220, up $0.052 or 1.64%.
59% of Gulf Output Went Dark Friday
Hurricane Isaias was approaching the Gulf Coast Friday with producers pulling workers and shutting in production. The Marine Minerals Administration said 1.259 billion cubic feet per day of Gulf natural gas output was offline by Friday afternoon. Lower-48 dry gas production fell to 109.3 bcf per day, the lowest reading since January.
The market proved Thursday that it would not hold higher prices on a weather story alone. Thursday’s storage build came in just above estimates but that was enough to flush the longs at the session highs. Friday’s shut-ins gave the shorts a reason to step aside and let the market recover.
The storm takes supply offline but it can also take demand away. Power outages and shipping delays cut LNG flows and regional consumption at the same time producers are shut in. NatGasWeather expects only modest demand destruction because temperatures were already comfortable, but that is still demand coming out of the market.
Mid-October Warmth Keeps the Sellers Comfortable
The forecast called for high pressure across most of the country through October 14 with highs in the 70s, 80s and 90s. California and the Southwest could see 100-degree readings. The Great Lakes and Northeast are pulling the first heating demand of the season with overnight lows in the 30s and 40s. That is a regional bid, not a national one.
Natural Gas Price Forecast
Every new Natural Gas analysis as it publishes, today's technical signal and key levels, live price — on one page.
See all Natural Gas forecastsNatGasWeather sees low demand over the next five days and only moderate demand late in the period. The Commodity Weather Group expects above-average temperatures through October 13. The second full week of October has most of the Lower 48 in the 60s to 80s. Nobody is running the heat or the air conditioning much in that range.
Natural gas could not run away from the sellers Friday even with the Gulf shut-ins propping it up. The weather models are not giving buyers a reason to pay up for a sustained move.
LNG flows were firm at 19.2 bcf per day Friday, up 10.3% from the prior week. Electricity output was running above year-ago levels. Those are peripheral supports. They have not changed the fall supply picture.
Storage Is Comfortable Enough to Cap Every Rally
The 85 bcf injection was below the five-year average build of 96 bcf. Inventories were 3.9% below year-ago levels but still 2.0% above the five-year seasonal average. That is enough gas in the ground to make every weather rally a harder trade to chase.
The Energy Information Administration is projecting end-of-October storage near 3,985 bcf, the highest level in 10 years and 5% above the five-year average. The agency also raised its 2027 dry gas production forecast to 116.0 bcf per day from 115.3 bcf per day.
Baker Hughes reported Friday that the active U.S. natural gas rig count fell by one to 132 rigs. The count is off the recent three-year high of 135. The lower rig count has not changed the broader production picture.
Daily November Natural Gas Futures Technical Analysis
November natural gas futures closed higher on Friday. 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, with potential targets at $2.902 and $2.896.
The minor trend is up. This is controlling the upside momentum. The new minor top is $3.298.
Several retracement levels are influencing the price action. Support is a price cluster at $3.216 to $3.210, followed by $3.154 to $3.146, $3.105 and $3.087. The 50-day moving average at $3.045 is additional support and a trend indicator.
On the upside, the next targets are $3.264, $3.291 and $3.350.
What to Watch
The hurricane shut-ins gave shorts a reason to cover Friday. The warm forecast through October 14 is not generating demand. Storage above the five-year average with end-of-October projections at their highest in a decade keeps every rally on a short leash. The restart timeline matters more than the landfall. Once production comes back, the supply picture resets to where it was before the storm.
November natural gas closed slightly above the price cluster at $3.216 to $3.210 Friday. The market is short-covering, not aggressively bidding. This is still a rally inside a bearish swing-chart trend with $3.395 as the change trigger and $2.912 as the downside confirmation.
More Information in our Economic Calendar.
