The Weekly Natural Gas Market Newsletter September 27, 2021
October 2021 NYMEX natural gas futures settled a modest 3.5 cents higher on the week but once again experienced some extreme price volatility in trading. The contract experienced a technical driven sell-off early in the trading week. The contract dropped to a low of $4.735 before rebounding strongly to post a high of $5.183 on Friday. As the natural gas market had been technically "overbought" it was due a price correction. However, the correction was indeed swift and short lived. The price action seen this week leads credence to the "buy the dips" philosophy of managing price risk exposure to the natural gas market at this time.
For the week ending 9/17, then EIA reported a storage injection of 76 BCF. This figure was mostly in-line with market expectations that range for a build between 68- 83 BCF. Storage inventories are 16% below year-ago levels and 6.9% below the previous 5-year average. With only 6 reporting weeks left in the traditional storage refill season, inventories are forecasted to start the winter withdrawal season at around 3.5 TCF.
With natural gas prices now at their highest levels in
over 8 years, the market is drawing the interest of
speculative traders. These "non-commercial" groups of
traders can significantly move a market in extreme price
directions. Unlike an end-user customer that actual
needs to buy and use natural gas to run operations,
speculative traders are simply looking to make "paper
profits" by trading in and out of their positions with the
sole purpose of making money in the natural gas
market. With a fundamentally bullish market already
supporting higher natural gas prices, under the right
conditions, trading in natural gas in the coming months
could propel prices into the double-digit range.
Mitigating both near-term and future price risk is a
necessity currently for end-users.