Last month, natural gas prices were rising and the October contract was pushing $2.50 per MMBtu. At month’s end, the October contract settled at $2.428 per MMBtu, but market sentiment has turned bearish. Natural gas prices have declined 16 of the last 18 trading days and as of today, the November contract is currently trading near $2.214 per MMBtu, with December trading at $2.457 per MMBtu. Mild fall weather continues to reduce demand and is expected to continue this weather pattern, based upon the current 8 – 14 day outlook. Production, on the other hand, remains high and is contributing to an over-supplied market. Compared to August of 2018, natural gas production has increased by more than 7%. As demand weakens, natural gas storage continues to absorb a significant amount of this increased production. Traders are even referencing the recent PG&E forced power blackouts as a contribution to the decline in demand, due to less gas-fired generation being used to power parts of Northern California. This week’s natural gas storage report added bearish pressure to pricing. The EIA reported an injection of 98 Bcf, which surpasses the market’s expectation of 94 Bcf, and is well above the average injection of 89 Bcf for that reported week. This puts natural gas storage levels 16% above last-years levels and within 1% of the five-year average. Analysts believe it’s going to take an extended period of cold winter temperatures and an increase in exports, to buoy natural gas prices.
