Warm weather sends Natural gas into the red

Natural gas prices tumble on shifting weather patterns.

Natural gas trading

Natural price drops on warmer forecasts

Warm weather forecasts and natural gas price drops: name a more iconic duo.

Yes, it’s that time of the week again where we reverse last week’s natural gas outlook – all thanks to changing weather patterns.

No one can control the way temperatures flow and weather changes. However, this does make natural gas prices difficult to predict on a week-by-week basis. It appears the weather is the most important factor when determining price action at the moment.

We’re meant to be in winter. The UK and parts of Europe had snow early this week, but it appears the US will have to wait before seasonal temperatures reach expected norms.

The latest weather outlook from Natural Gas Weather says: “A cool shot lingers across the Great Lakes and Northeast this morning w/chilly lows of 10s to 30s. However, most of the rest of the US will be mild to nice w/highs of 50s to 70s for light demand.

“By Wed-Thu, almost the entire US will be warmer vs normal w/highs of 40s-50s North and 60s to 70s South as upper high pressure rules for very light national demand. A weather system/cold shot will push into the Midwest late this weekend into early next week w/lows of 10s to 30s for a minor increase in national demand.

“Overall, national demand will be LOW to VERY LOW.”

The weather has put natural gas traders in a bearish mood. Henry Hub natural gas futures are down over 5% as of Tuesday 30^th November, trading for around $4.614. What a difference a weekend makes. For comparison, Friday 26^th November saw gas futures reach a high of $5.515.

Perhaps this might give US stockpiles some relief? We’re supposed to be transitioning into the winter months where high consumption is on the cards. US gas stockpiles are lower than this time last year, according to EIA data, so perhaps it’s a good thing demand will remain on the low-end of the scale before temperatures really start to drop.

A quick look at EIA natural gas inventories data

Thursday sees the release of the most up-to-date EIA gas storage numbers, but we can get a look at the situation stateside with the previous report.

Working gas in storage was 3,623 Bcf as of Friday, November 19, 2021, according to EIA estimates. This represents a net decrease of 21 Bcf from the previous week. Stocks were 320 Bcf less than last year at this time and 58 Bcf below the five-year average of 3,681 Bcf. At 3,623 Bcf, total working gas is within the five-year historical range.

US LNG in high demand

Throughput at US liquid natural gas export terminals is up month-on-month. With Europe running low on gas, and Asia with a big LNG appetite, it appears American LNG is in high demand worldwide right now.

Inflows at export hubs hit 11.4 Bcfd in November so far – a considerable increase against October’s 10.5 Bcfd. Those numbers put the United States on course to match the monthly record of 11.5 Bcfd registered in April of this year.