Weekly Natural Gas Storage Report - Bearish Early November Outlook

Oct. 12, 2018 1:17 PM ETUNG, UGAZF, DGAZ, BOIL, KOLD, UNL, DCNG, GAZ70 Comments17 Likes

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).
  • Looking for a community to discuss ideas with? HFI Research Natural Gas features a chat room of like-minded investors sharing investing ideas and strategies. Start your free trial today »

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 (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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