US Natural Gas prices dropped to a three-week low, with NYMEX Henry Hub futures falling to $2.90/MMBtu. This marks four straight days of price declines. The drop is mainly due to increased weekly storage injections, which are outweighing expectations for colder weather in late October in the eastern US. Last week, US gas inventory rose by 80 Bcf, which matches market expectations of about 80.8 Bcf. This increase is close to the five-year average of 83 Bcf for this time of year. As of October 10, the total gas stockpiles reached 3.721 Tcf, which is 4.3% above the five-year average, indicating a surplus as winter nears.

Fxstreet Insights Team

The FXStreet Insights Team, made up of journalists, gathers market observations from experts. Their information includes notes and insights from both internal and external analysts. With natural gas prices falling below $2.90/MMBtu, the market shows signs of weakness. Weekly storage injections are currently maintaining a good supply, overshadowing initial forecasts of colder weather. On October 10, our inventories were 3.721 trillion cubic feet, a healthy 4.3% above the five-year average. This oversupply suggests traders should think about bearish strategies in the near future. We see potential in buying put options on the November and December futures contracts to benefit from further price drops. Creating bear put spreads can also help reduce initial costs while managing risk. This downward trend is further supported by consistently high production levels. Output from major areas like the Permian and Appalachia is near a record 106 Bcf per day. This strong supply surpasses the solid demand from LNG export facilities, which are currently pulling about 14.5 Bcf per day. For now, the market is focused on the oversupply.

Cautionary Note

Still, we need to be cautious about being too bearish as winter approaches. The latest forecasts from the Climate Prediction Center hint at a higher chance of a colder-than-usual start to November in the Midwest and Northeast. Any sign of lasting cold could quickly raise prices from these low levels, surprising short-sellers. We recall the price drop that occurred after the mild winter of 2023-2024, demonstrating the risks associated with a warmer winter. On the other hand, we’ve seen prices spike during sudden cold snaps in past years when inventories were depleted more quickly than expected. This scenario makes selling out-of-the-money puts a worthwhile strategy to collect premiums while betting that extreme cold will support prices. Create your live VT Markets account and start trading now.

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