EIA Report Meets Expectations, But Natural Gas Prices Continue To Fall

Today's EIA report showed an injection of 98 bcf for the week ending 10/4. This was almost dead-on our forecast.

It was well within the range of the various market estimates as well, so we should expect prices to have no reaction to this report, right? Well, not exactly. While it was the market expectation, it confirms very loose supply/demand balances remain in place, as seen by looking at the last 10 weeks' demand vs storage change.

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In short, we simply have too much supply. Production has returned back near its all-time highs.

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Weather demand has been stout more often than not dating all the way back to the end of June but has been unable to prevent large builds in natural gas storage thanks to these record supply levels. And even the weather demand is set to tail off significantly, with well below normal demand projected out in week two.

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Is this simply a hopeless scenario for natural gas bulls? Perhaps not, as prices around the 2.20 level in prompt month are quite low with the full winter season still to come, but the weather pattern needs to deliver some enhanced demand in the not-too-distant future in order to stimulate any buying in the commodity. In addition, the lower prices could alter the supply/demand balances enough to stop the bleeding, again, pending what happens with the upcoming season's weather pattern.