Natural Gas Prices Surge as Inventory Woes Shift into Focus Ahead of Winters Support Bulls
Natural Gas Prices Surge as Inventory Woes Shift into Focus Ahead of Winters Support Bulls
The strategy of selling the rips in natural gas futures appears likely to provide limited success
- Natural gas futures are surging as late September heat warms prices.
- The storage surplus isn’t encouraging enough going into winter.
- European premium vs. U.S. surges as storm interrupts U.S. exports.
- Technical setups are turning bullish after prices broke this week over a key trendline.
U.S. natural gas futures (/NGX4) rose nearly 6% through afternoon trading today as traders considered inventory and production figures ahead of the winter withdrawal season. The move put the commodity on track for its best week since October 2023.
The move comes after the Energy Information Administration (EIA) reported yesterday on weekly inventory data for natural gas. The U.S. added 47 billion cubic feet (bcf) to underground storage across the lower 48 states for the week ending Sept. 20.
While storage levels remain higher than at this time last year, the surplus premium has shrunk over the past couple of months, with total working gas only 159 bcf higher than a year ago, according to EIA data. Some warmer-than-average weather through the first half of October looks likely, which could put more pressure on inventories before the weather turns cold and starts boosting demand in the winter.
Shifting to a more short-term focus, Hurricane Helene, now Tropical Storm Helene, has caused shipping disruptions in the Gulf of Mexico. While export facilities to the west of the storm’s path were unaffected, shipping lane disruptions delayed some transits due for Europe. The effect is seen in the premium in European prices, as per Dutch TTF futures, vs. Henry Hub futures, which rose nearly 10% this week to about $9.7.
Another factor driving up European prices is that Norway—a major producer in Europe—extended maintenance shut-ins for several producers. Meanwhile, fighting in Russia’s Kursk region is agitating fears that Europe’s supply chains could break down ahead of the winter.
Back to the United States. Gas production remains down from August, with total production just above 100 bcf, about 2 bcf lower than the month before. While production has risen gradually over the past week, traders see it as a bullish sign going into the winter. Production will likely have to increase by at least several bcf per day over the next month to prevent inventory declines.
Moving to the technical setup, the chart for the November contract (/NGX4) is increasingly bullish. Today’s move put prices above the weekly range and the swing highs from August and late July. Earlier this week, we also broke a trendline set in place from those swing highs. The 3 psychological level is now in focus. A decisive move higher would likely force a short covering of positions, potentially driving prices even higher.
Overall, with winter quickly approaching, the strategy of selling the rips in natural gas futures, is likely a strategy that will provide limited success.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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