Natural gas futures in the US slumped from their soaring highs on Wednesday, after weather forecasts predicted above-seasonal warm temperatures for the next two weeks.
Natural gas futures for November delivery fell to $5.45 per million Btu at the time of writing, marking a modest decline from Monday’s high of nearly $6 per million Btu. The sudden reversal in price acceleration comes as above-normal temperature’s across America’s East Coast are expected through to October 13, while temperatures in the West Coast are expected to remain below seasonal.
“October is supposed to be warmer than normal. If that’s the case, natgas is going to find some stability,” senior market analyst at Price Futures Group Phil Flynn told Bloomberg. Heating degree days (HDD), which serve as an estimate of how much energy is demanded to heat a dwelling when temperatures are below 18 degrees Celsius (65F), rose from 1 HDD to almost 3 HDD between September 15-30, but have since diverged downwards from the average trend, and are expected to continue on the trajectory until October 13.
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However, despite the sudden decline in natural gas prices, US stockpiles are expected to remain significantly depleted relative to the historical average due to increasing demand. According to Bloomberg NEF’s latest US Gas Monthly Report, “there’s a 64% chance that inventories will finish below the five-year average level at the end of winter 2021-22.”
Information for this briefing was found via Bloomberg and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
