Natural Gas Prices Bounce On Hotter Forecasts, Tighter Market

As of 12:45 PM EDT October natural gas prices were sitting up about 2% after a decent bounce yesterday as well. Though they are off their highs for the day, buying on very significant volume arrived early in the morning. We feel part of this rally was led by hotter medium and long-range forecasts that have boosted cooling demand expectations, as well as a quicker turnaround in power restoration in Florida than some expected and a resumption of LNG exports. 

This combination of factors led us to warn subscribers last afternoon of further near-term upside for natural gas prices. 

This morning these trends appeared to manifest themselves further; model guidance turned hotter overnight and our demand expectations increased. Yet early this morning prices were down a bit. We used that opportunity to send our new Morning Text Alert straight to our subscribers’ phones just before 7 AM EDT warning that a rally was imminent as our morning weather forecast would contain elevated demand while also demonstrating a marginally tighter market. 

After prices spiked around 7:30 AM, we continued to see upside, and our Morning Weather Update out at 7:55 AM furthered our short-term bullish sentiment as prices continued higher through the morning, ensuring subscribers were aware of why prices were finally bouncing after the small overnight decline. 

How quickly things can change, however. Through the early afternoon, we have seen prices pull back from their highs, with J-V8 already flipping just a tad negative. Cash prices have remained weak as weather-driven demand over the next few days will remain anemic. Yet power-burns are increasing as more of Florida gets their power back after Irma, with heat returning over the weekend and into next week that will further bolster power-burns. With over 170,000 October contracts changing hands already today, we can expect a bit more volatility this week for natural gas futures, especially ahead of what should be a very large storage injection to be announced by the Energy Information Administration on Thursday.