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James Hyerczyk
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Natural Gas

Natural gas futures are trading lower ahead of the latest government storage report, and as traders noted signs of production recovering following hurricane-related issues earlier in the week. Today is the first day that the December futures contract is the front-month option. This could be contributing to the volatile price action.

The market is also testing a short-term support zone at $3.177 to $3.133. Trader reaction to this zone could set the near-term tone.

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At 13:46 GMT, December natural gas is trading $3.158, down $0.133 or -4.04%.

US Energy Information Administration Weekly Inventories Report

The EIA will release its latest weekly storage estimates at 14:30 GMT. It is expected to show a lighter-than-average build for the week-ending October 23.

Natural Gas Weather (NGI) is reporting that a Bloomberg survey of six analysts showed injection estimates ranging from 17 Bcf to 39 Bcf, with a median of 37 Bcf. Reuters polled 16 analysts, whose estimates ranged from increases of 17 Bcf to 46 Bcf, with a median injection of 38 Bcf. NGI projected a 42 Bcf injection.

Last year, the EIA recorded an 89 Bcf injection for the similar week, and the five-year average is a 67 Bcf build.

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Short-Term Weather Outlook

According to NatGasWeather for October 28 to November 4:  “An early season cold front continues to impact the interior West, Plains, and Midwest with rain, snow, and chilly lows of 10s to 30s, including snow into Northern Texas with lows of 20s. The East remains warm with highs of 60s to 80s, while the far West is comfortable with highs of 50s to 70s. Heavy rain and wind will push into the Gulf Coast and east-central US Wednesday-Thursday as Tropical Storm Zeta makes landfall. Late in the week, the Midwest and central U.S. will warm back into the 50s to 70s, while the Northeast cools into the 30s to 50s as weather systems sweep through. Overall, national demand will be high this week.”

Daily Forecast

We are anticipating short-term volatility as traders adjust to the new December futures contract, following the expiration of the November contract. Our longer-term view remains bullish amid support from the hedge funds, rising liquefied natural gas (LNG) demand and an expected reduction in production.

The next major move in the market will likely be determined by whether cold temperatures return in November or December.

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

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