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Article / 09 November 2017 at 14:22 GMT

NatGas in breakout mode as winter looms

Ole Hansen

Head of Commodity Strategy / Saxo Bank

Denmark

Natural gas in breakout mode ahead of winter season
Inventory report expected to show rise of just 14 bcf
Gas has traded in tightest annual range in percentage terms since at least 1990
Forecasters see chance of colder-than-normal winter, after three mild winters
Demand surge could lead to price spikes during heating season

Some forecasters expect a colder-than-normal winter, which

would boost demand for natural gas. Image: Shutterstock

By Ole Hansen

Natural gas is attempting to break out a price range that has prevailed since June. Colder weather and expectations of an unseasonally low injection into storage have supported the price. Today's inventory report at 1530 GMT is expected to show an increase of just 14 billion cubic feet compared with a five-year average of 45 bcf for this week.

After the roll to the higher-priced December contract (NGZ7) earlier this week, the continuation chart shows the first real attempt to break out of the range that has prevailed since June. With just seven weeks left of the year, natural gas has traded in the tightest annual range in percentage terms since at least 1990. For that to change gas prices would need to rally by more than 15% before year-end.

Source: Saxo Bank

Longer-term weather forecasters have for some time been pointing towards potential for a colder-than-normal winter, after three mild winters in succession. The early demand surge,which today's report is likely to show, threatens to exacerbate already-tight supplies and could lead to price spikes during the heating season.

US natural gas stock building normally lasts until the middle of November before the winter withdrawal season until April begins. Smaller-than-expected injections combined with rising exports and demand from utilities could create some upside pressure during and not least towards the end of the withdrawal season.

— Edited by John Acher

Ole Hansen is head of commodity strategy at Saxo Bank

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