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Natural gas futures tumbled last week with a surprisingly larger-than-expected government inventory report contributing the most to the losses. The size of the storage injection raised concerns for the bulls over supply growth, which weighed on prices.
The October futures contract expiration and deep discounts on spot market deals also helped drive prices lower despite forecasts calling for unseasonable heat over the short-run and an early cold snap in the Northwest.
Last week, November natural gas futures settled at $2.404, down 0.151 or -5.91%.
The week-ended with Bespoke Weather Services issuing a warning about lower prices.
“Natural gas prices have now declined each of the last two weeks, with the new prompt month November contract settling just over the $2.40 support level, which also is very close to the contract’s 50-day moving average,” Bespoke told clients Friday. “There is the chance that prices pause here,” as recent price declines “could tighten up balances somewhat, and we still have some elevated demand to go through for another week or so.”
“But unless balances tighten in a significant way, or the higher demand regime can persist longer, it is likely to be tough to avoid more downside in prices.”
U.S. Energy Information Administration Weekly Storage Report
On Thursday, the U.S. Energy Information Administration (EIA) reported a larger-than-expected weekly injection into U.S. natural gas stocks, topping even the highest estimates.
The EIA reported that domestic supplies of natural gas rose by 102 billion cubic feet for the week ended September 20.
Traders were looking for the EIA report to show an injection in the upper 80s or low 90s Bcf for the week-ending September 20.
A year ago the EIA reported a 51 Bcf build. The five-year average is a 74 Bcf injection.
Total stocks now stand at 3.205 trillion cubic feet, up 444 billion cubic feet from a year ago, but 47 billion below the five-year average, the government said.
Short-Term Weather Outlook
According to NatGasWeather for September 27 to October 32, “High pressure will strengthen to unseasonably strong levels across the southern and eastern halves of the country this weekend through next week with very warm to hot conditions as highs reach the 80s to 90s. It will be hottest across from Texas to the Southeast for relatively strong late season demand. At the same time an early season cold shot will advance into the West with valley rain and mountain snow with lows dropping into the chilly 20s to 40s for modest early season heating demand. Essentially, stronger demand the next seven days with a better mix of heating and cooling needs.”