Bulls Take Natural Gas up 3% As Supply Problem Changes
Natural gas prices are higher today than they have been in a week thanks to a supply issue that sees reserves dipping.
Quick overview
- Natural gas futures in the U.S. rose by 3% to $2.94, marking a one-week high due to diminishing supply.
- Concerns over supply have emerged as natural gas reserves dip, reversing a trend of historically low prices.
- Weather forecasts suggest a warmer October, which may impact gas prices and storage levels moving into winter.
- Traders are advised to monitor upcoming storage data, as current production levels are expected to hit an 11-week low.
Natural gas futures in the United States rose by 3% on Thursday to $2.94, and this is the highest the price has been in a week thanks to diminishing supply.
With natural gas reserves in the U.S. dipping, the price climbed this morning and remains at a one-week high. Throughout much of the year, natural gas reserves have been tremendously elevated, leading to lower prices than usual. There are now supply concerns that are bringing prices up from record lows.
Gas prices may not stay elevated for long. October could be a warmer month than usual, according to weather forecasts, and gas storage injections have been about 6% higher for much of the year. That trend may not change significantly as we head toward the winter months.
Storage Data to Inform Prices
The U.S. Nymex futures are up for now and could remain elevated for the remaining couple of sessions before September trading closes off. However, traders will want to look at storage data that is coming on Friday.
The last storage report for the lower 48 U.S. states showed that there was a gain of 75 billion cubic feet from September 12th-19th. The next storage data report could show lower numbers there, but even so, the change is not expected to be significant.
The oversupply problem has plagued the industry for months now, leading to historically low prices and stagnation in trading. Gas production has dipped as demand drops. The expectation for gas production for Thursday is that it will hit an 11-week low. If that is the case, then traders should anticipate lower prices for Friday, but perhaps not as low as they have been recently.
The bulls have helped the market rally for now, but it is expected to be a short-lived upswing as reserves are still quite high and the weather forecast points to a mild and warm fall period. As we get closer to winter, the U.S. gas reserves should start to drain rapidly, but perhaps not as rapidly as the previous year, leading to somewhat low gas prices for a while.
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