Natural Gas Futures Slip amid Demand Letup

U.S. natural gas prices slid to their lowest level in around two months with futures starting the week low on Monday.

As weather forecasting models predicted mild temperatures, futures saw a decline of nearly 5 percent last week with the expectation that this should limit demand for natural gas in the coming days.

Predictions for the heating-fuel for November delivery dipped to $2.835 per million British thermal units at one point. There were little changes observed that day as the numbers hit its lowest since Aug. 9 before crawling back to $2.867 by 8:35AM ET.

Bearish speculators are anticipating warm weather, reducing demand during early winter for the heating-fuel. The eastern part of the U.S. will rise back into the 70s and 80s Fahrenheit through Oct. 14, as high pressure returns. According to forecasts, the West Coast will be mild to warm, while a little over warm to hot over southern U.S.

Traders reacted to the events leading to the higher demand for the commodity was coming to an end as gas futures often edge to a seasonal low in October, before recovering in the winter, when use for the heating-fuel peaks.

According to the U.S. Energy Information Administration, the total natural gas in storage currently stands at 3.508 trillion cubic feet, about 4.3 percent lower than levels at this time a year ago.

Those figures compares with a gain of 42 billion cubic feet in the previous week and around 79 billion build a year earlier.

Natural Gas Seasonal Transformation

The natural gas market will undergo its annual transformation from the season in around six weeks, wherein stockpiles build to the time of the year where they usually decline.

During the winter months, natural gas is traditionally a seasonal commodity. The price differentials for deferred months or the shape of the forward curve, when examined, its winter months tend to trade at a premium to the spring, summer, and fall prices.

The price spread between the months of November and December 2017 futures contracts that trade on the NYME (New York Mercantile Exchange) was trading at an 18.3 percent premium on Oct. 5 for the December natural gas futures.

Despite the projected trading figures, the market expects increasing demand for heating as cold weather is experienced across vast areas of the United States during December and the few months that follow.

The price of early November natural gas futures has slipped to the bottom end of its trading range after a false increase when the spread was trading at the lower price.

Want to become an investor/trader in the stock market? Fill yourself in on marketing news by subscribing to HQBroker. We encourage traders to know more about the latest information about forex, stock markets, commodities, and economies.