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Natural Gas Is Selling Off Again On Weather, But The Market Is Getting Ahead Of Itself

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Includes: BOIL, DCNG, DGAZ, GAZ-OLD, GAZB, KOLD, UGAZ, UNG, UNL
by: HFIR Energy
HFIR Energy
Contrarian, hedge fund manager, commodities, oil & gas
Summary

Weather was the culprit again, pushing prices lower.

But on a fundamental change basis, the sell-off is not justified.

November forecasts remain unchanged, but could move either way presenting risks to both longs and shorts at the moment.

However, given that the bearish revision was October focused, we think the market is getting ahead of itself.

Welcome to the getting ahead of itself edition of Natural Gas Daily!

Natural gas is taking it on the chin today. Weather was the culprit again today.

Last week, we saw natural gas gain as weather for the end of October moderated. The bullish revision on Friday last week was reversed over the weekend.

However, to put the bearish weather into perspective, our net storage change calculation was only +5 Bcf. In the grand scheme of things, 5 Bcf more in storage is completely irrelevant with heating season right in front of us.

Similar to the sell-off we saw two weeks ago, we think the market is once again getting ahead of itself with the sell-off we are seeing today. The big risk still hanging over the market today is whether November temperatures will remain normal (current forecast) or shift bearish. If it does shift warmer, then we should expect the current sell-off to have some legs, but if not, prices will swiftly rebound.

Keep in mind that the bearish revision today was for the next 10-days, so Nov forecasts remain unchanged.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.