Weekly Natural Gas Storage Report - Bearish Early November Outlook

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Includes: BOIL, DCNG, DGAZ, GAZB, KOLD, UGAZ, UNG, UNL
by: HFIR Energy
Summary

EIA reported a storage build of 90 Bcf for the week ending October 5.

This compares to the +92 Bcf we projected and consensus average of +91 Bcf. The +90 Bcf was in line with the five-year average of +90 Bcf and 3 Bcf higher.

For the week ending 10/12, we currently have a forecast of +85 Bcf. EOS has now decreased to 3.177 Tcf.

The first week of November weather outlook looks to be skewed to the bear side (warmer than normal).

Welcome to the weekly natural gas storage edition of Natural Gas Daily!

EIA reported a storage build of 90 Bcf for the week ending October 5. This compares to the +92 Bcf we projected and consensus average of +91 Bcf. The +90 Bcf was in line with the five-year average of +90 Bcf and 3 Bcf higher than last year's.

Source: EIA

Next Week's Estimate

For the week ending 10/12, we currently have a forecast of +85 Bcf.

EOS has now decreased to 3.177 Tcf.

Early November Weather Outlook Expected to be Neutral to Bearish

Natural gas prices are falling today as the latest ECMWF-EPS long-range weather outlook shows neutral to bearish weather in the first week of November:

Source: StormVistaWxModels.com

We wrote in our exclusive long-range weather report that such an outlook could easily push natural gas prices back to $3/MMBtu. In addition, along with the start-up of NEXUS, Lower 48 production is expected to trend higher again putting more near-term pressure on natural gas prices.

What's interesting about today's natural gas move is that ECMWF-EPS 00z showed much higher TDDs this morning, so the bearish price action we are seeing today confirms that natural gas prices have likely topped out in the near-term.

But this week's natural gas balance got an uplift, thanks to a pipeline outage in Northwest Canada. The Enbridge (NYSE:ENB) line outage reduced natural gas flows into the US by ~1 Bcf/d, which has supported balances a bit.

Looking ahead, with natural gas storage balances so low, natural gas prices will become even more susceptible to weather model fluctuations. We believe given where storage is - the natural gas volatility could be biased to the bull side if the weather outlook is supportive over the heating demand season.

As a result, we will likely be trading with a bullish bias over the winter.

For now, our next trade is likely to be a bearish one. We currently do not have a trading position on. We will alert subscribers on a real-time basis when we do initiate a new position.

Note - ECMWF-EPS 00z finishes updating at 4 AM EST, and ECMWF-EPS 12z finishes at 4 PM EST. When daylight savings end, ECMWF-EPS finishes updating at 3 AM EST and ECMWF-EPS 12z finishes at 3 PM EST.

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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.