Natural Gas: Sweet Spot for Support Elusive Amid Choppy Output, Weather

  • Commodities Analysis
  • Editors Pick
  • Market dynamics make it difficult to zero in on support between mid-$2 and $3
  • Output “all over the place” as maintenance-led outages mitigated by LNG volumes
  • EIA likely to report 88 bcf build last week; 5-yr average 84 bcf, previous week 64 bcf

“It’s all over the place” — We’re talking about output of natural gas , not prices. On the other end, the weather across the United States is projected to be as wacky or, if you will, unseasonably pleasant over the next few weeks. 

Combined, it’s going to make it harder to find a sweet spot for support in the mid $2 and $3 range for gas futures on the New York Mercantile Exchange’s Henry Hub. Over the past week, the market has swung from a low of $2.64 per million metric British thermal units to a high of $2.88 at the time of writing. Natural Gas Daily Chart

With shoulder season — the transition from summer to winter with the current fall, or autumn, period — in full bloom, maintenance-imposed production interruptions are being mitigated by stronger output volumes for LNG, or liquefied natural gas.

Production totaled 100.3 bcf/d, or billion cubic feet per day, for Wednesday, versus a revised 101.7 bcf/d for Tuesday, energy research consultancy Wood Mackenzie said in an estimate carried by trade journal The declines were concentrated in the U.S. Northeast and Louisiana, where repair and upgrade projects were ongoing, involving a mix of planned and unplanned work.

Wood Mackenzie’s estimates also showed total LNG demand rising to 11.6 bcf/d for Wednesday, up from 11.1 bcf/d a day earlier. Feed gas volumes have been under pressure amid maintenance events at multiple export facilities, including Cove Point in Maryland, but these projects are expected to culminate this fall, creating a potential path for more gains.

Output has been volatile all week, naturalgasintel reports, and for much of September too, it says, in large part because of seasonal maintenance work. The latest hits Wednesday left production more than 2 bcf/d lower than the peak levels of 2023, it adds.

“We’ve had production going back-and-forth for a while now,” Steve Blair, vice president for clearing sales at Marex Capital Markets Inc, told the site, adding that uneven production likely contributed to “the market being a little stronger” this week. 

Production “Pretty Impressive”

John Sodergreen — who authors another trade publication on gas called “The Desk” — concurs on the choppy output for both dry and wet gas, saying:

“Production is still pretty impressive as is LNG demand, despite the warm winter forecasts we’ve seen this week for both Europe and Asia.  Bottom line for this moment in shoulder season: It’s the shoulder season, there is no bottom line. Ask me again in November.”

“For now, levels are moving nicely, flows are operating as they  should, maintenance is on schedule, LNG is momentarily fickle,  which is also normal for this period, weather-related demand is  manageable and no hurricanes are in sight.”

Ahead of the weekly update on U.S. natural gas storage due  at 10:30 ET (14:30 GMT) today from the EIA, or Energy Information Administration, a Reuters poll suggests that utilities across the country likely added an above-average 88 bcf to inventories.

That would be lower than the 103 bcf injected during the same week a year ago but would be a little higher than the five-year (2018-2022) average increase of 84 bcf. For the week ended Sept. 15, utilities added 64 bcf.

The forecast for the week ended Sept. 22 would lift stockpiles to 3.357 tcf, or trillion cubic feet, 13% above the same week a year ago and 6% above the five-year average.

Demand for gas for heating or cooling was low last week because the weather was milder than normal. There were 54 TDDs, or total degree days, last week compared with a 30-year normal of 64 TDDs for the period, according to data from Reuters-associated Refinitiv.

TDDs measure the number of degrees a day's average temperature is above or below 65 degrees Fahrenheit (18 Celsius) to estimate demand to cool or heat homes and businesses.

Energy markets reporting service Platts projects 90-bcf build should be right on the money for last week.

“Fundamentals during the week in progress reflect looser balances, giving way to a larger storage injection,” it said.

Negative Roll-Yield Coming?

Price-wise, the gas trade could be bumpy over the next few sessions as the market adjusts to the November contract which replaced October as the front-month with a premium of more than 20 cents, said Rhett Milne of NatgasWeather.

“There’s potential for negative roll yield,  where Nov. 23 could drop into the recent trading range of Oct,” said Milne. 

“To our view, it would be fitting if Nov. 23 fell to near $2.70  since this is where front-month contracts have traded the prior  three to four months. Is this part of the reason Nov. 23 prices are  4 cents lower in overnight trade?”-- Milne asked, saying that would be a “good question”. 

Milne says the next three EIA builds are likely to be larger than normal due to near-perfect temperatures over much of the United States, “a few of which could be near or over 100 bcf, increasing surpluses back to 200- or 210-bcf. Our models continue to show end-of-injection season supplies will be near 3,830 bcf in  mid-November.” 

Bargain-Buying Sought Ahead of Winter

Eli Rubin of EBW Analytics points to the negative roll as well. He noted that 11 of the past 14 months  have rolled over to the bearish side, for an average loss of 16.6¢.  He adds:

“The exceptions to the bearish trend were forward exposure during periods prone to production mid-Winter contracts,  when drillers are hesitant to sell freeze-offs, and last month, with a substantial bullish weather shift helping the expiring front month to eke  out a tiny gain.

Dwindling trading volumes increase price volatility risks for the NYMEX front-month natural gas contract. With  a bearish trend into expiration and bearish catalysts from both  weather and LNG, however, our near-term bias is to the downside.” 

Still, Blair of Marex Capital Markets said some speculators have been bargain buying now ahead of likely higher winter prices. He adds:

“I think that the market is somewhat directionless and the specs are playing with this market a bit,” yet traders overall are “waiting for more fundamental direction.”

Leticia Gonzales, price and markets editor at, explains:

“It’s always a battle between futures and cash when it comes to the expiration of the prompt-month Nymex contract.

This time, the ongoing 90-degree heat in the South is keeping cash strong, so futures rallied to converge with cash. That said, futures will be hard-pressed to sustain any meaningful gains considering all the bearish factors currently in play.”

Weather Favors the Bears

On the weather front too, forecasts continue to favor the bears.

NatGasWeather said near-term forecasts pointed to seasonal weather across most of the Lower 48, with some areas above normal and some moderately below. But at this time of year, generally average weather results in benign temperatures and soft natural gas demand.

Farther out, forecasts pointed to “strong high pressure over most of the U.S. Oct. 10-20 for widespread above-normal temperatures,” including comfortable conditions over northern portions of the country, NatGasWeather added.

“Going forward, colder-than-normal temperatures will be needed across the northern U.S. for weather sentiment to be considered bullish,” according to the firm. However, “the soonest opportunity” for such cold to arrive “won’t be until the second half of October.”


Disclaimer: The aim of this article is purely to inform and does not in any way represent an inducement or recommendation to buy or sell any commodity or its related securities. The author Barani Krishnan does not hold a position in the commodities and securities he writes about. He typically uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables.

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