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LNG, Colder Weather Send Natural Gas Soaring; High-Impact Winter On The Way

Wednesday, October 21, 2020 at 9:47AM

The natural gas market has been on quite a bullish run over the last couple of weeks, with price action today taking the November contract up over the $3.00 level, the highest price we have seen a prompt month contract in 2020.

prompt month natural gas

Why the sudden strength after so many months in the doldrums? The main reason is a climb in LNG volumes, returning to levels much higher than what we saw over the summer when high global storage held exports down.

US LNG exports

With more natural gas now set to leave the U.S, that tightens up the supply / demand balance enough so that we appear to be safely avoiding any storage constraints.

Helping the bullish narrative has been the weather pattern, which is turning out colder here in the month of October up north, while there has still been some notable heat in the South and Southwest.

Month-to-date temperature anomalies:

Mean temperature US October 2020

The upcoming 15 days continue to look cold, especially in the central U.S, elevating GWDDs.

North american temperatures october 2020
GWDD Forecasts

We now project that the month of October will finish with more than 350 total GWDDs, not as high as the last two years, but still rather impressive.

Total October gwdds

***Important Note: We cannot stress how significant the weather will be as we head into this winter season. With LNG volumes back higher, and production still sitting roughly 7 bcf lower on a year-over-year basis, there is significant upside price risk in the event of a cold winter. On the flip side, another big warm winter can outweigh the bullish fundamental backdrop, leading to forward price declines.

Good news! Our services are tailor-made to assist the active natural gas trader with our unique blend of weather and fundamentals analysis, which includes forward GWDD outlooks, along with proprietary storage analysis using supply / demand balances along with various weather scenarios. It is a must-have for this upcoming cold season. 

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Originally Posted on October 21, 2020 – LNG, Colder Weather Send Natural Gas Soaring; High-Impact Winter On The Way

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