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James Hyerczyk
Natural Gas

Natural gas futures are trading lower on Friday, but attempting to rebound from earlier lows as some traders take profits ahead of the weekend, following a steep plunge this week. The bulk of the selling took place on Thursday with some of the losses coming early in the session as weather models shifted to the warm side and some coming in response to a huge bearish miss in the latest government storage report.

At 12:50 GMT, January natural gas futures are trading $2.491, down $0.016 or -0.64%.

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Natural Gas Intelligence (NGI) reported that much of the decline may have been attributed to speculative traders unwinding their long positions. Several analysts had noted recent Commodity Futures Trading Commission data, which showed net longs dropping more than 20% to 65,975 contracts. This is down significantly, Mizuho Securities USA’s Robert Yawger, director of Energy Futures said, “But still large enough to do damage if everybody gets out at once, though I am guessing a significant chunk got out Thursday.”

Weekly US Energy Information Administration Storage Report

The EIA reported on Thursday that domestic supplies of natural gas edged down by 1 billion cubic feet for the week ended November 27. On average, the data were expected to show a decline of 13 billion cubic feet for the week, according to analysts polled by S&P Global Platts.

Ahead of the government report, Natural Gas Intelligence (NGI) said, “A Bloomberg survey of six analysts produced a range from a 26 Bcf withdrawal to a 1 Bcf injection, with a median draw of 19 Bcf. Reuters polled 16 analysts, whose withdrawal estimates were as low as 28 Bcf and injection estimates were as high as 3 Bcf, with a median decrease of 12 Bcf. A Wall Street Journal poll of 12 analysts showed draws ranging from 8-28 Bcf. NGI projected a 15 Bcf pull.”

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Short-Term Weather Outlook

According to NatGasWeather for December 4-10, “Chilly conditions will impact the Rockies and Plains again this morning with frosty lows of 10s to 30s, including 20s into Northern Texas. One system will track into the Southeast today, then phase with a cool shot over the Northeast this weekend for slightly cool conditions with highs of 30s to 50s. A second milder system will track into Texas with showers this weekend. However, the rest of the U.S. will be quite comfortable for early December, including the important Midwest region where temperatures will be 15-25 Fahrenheit warmer versus normal. Overall, national demand will be moderate the next few days then low late this weekend and next week.”

Daily Forecast

The soft start to winter is expected to continue to weigh on prices although yesterday’s steep sell-off may have been overextended, which could trigger a decent short-covering rally.

The weather and increased production is likely to cap gains and may even lead to further downside pressure although these losses may be offset somewhat by liquefied natural gas demand, which remains very supportive at near-record levels. Nonetheless, the bears are back and they may not leave until winter shows up, which may not be until early 2021.

For a look at all of today’s economic events, check out our economic calendar.
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