Natural gas holds above $3.30 as supply constraints support prices

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Supply imbalances support natural gas prices

Regional gas inventories reveal supply imbalances

⠀An interesting feature of the latest EIA data is the regional distribution of inventories. Despite the increase in nationwide reserves to 3.500 Tcf, inventories in the South Central region, which includes major gas production and export hubs, stand at 1.076 Tcf, approximately 10.3% below last year's level. In the region's salt storage facilities, the deficit reaches 23.1%, which is particularly important because of their ability to quickly supply additional volumes of gas to the market during sudden increases in demand.⠀Meanwhile, inventories in the eastern and Midwestern United States already exceed their corresponding levels from last year. This divergence means that overall statistics do not fully reflect market conditions near key export infrastructure. Additional attention is focused on the situation at U.S. LNG terminals. At Freeport LNG, maintenance work continues on the second production train, which began on October 2, while maintenance at Cove Point may last until the second half of the month.⠀

LNG disruptions widen global price divergence

⠀These restrictions temporarily reduce the volumes of gas flowing to export facilities, leaving additional supplies within the United States. At the same time, global market conditions are becoming considerably tighter: European TTF prices approached €87/MWh on October 13 amid low storage levels and limited LNG supplies from the Persian Gulf.⠀Ongoing uncertainty surrounding the Strait of Hormuz keeps international supply costs elevated, but U.S. producers cannot immediately take advantage of this situation due to export infrastructure constraints. This divergence between domestic and international gas markets is becoming one of the important factors in price formation.⠀

Weather outlook and technical levels shape next move

⠀In the near term, the balance between the recovery of U.S. production following Hurricane Isaias and the actual utilization of export terminals will be crucial. Additional uncertainty comes from forecasts of above-normal temperatures across much of the United States over the next 11–15 days, which could delay an increase in heating demand. The next EIA report, scheduled for October 15, will show how quickly the market continues to replenish inventories ahead of the winter season.⠀As long as NATGAS trades above $3.34–3.30, the chances of breaking through resistance at $3.42–3.46 and advancing toward $3.50 will remain. A loss of support around $3.30, as I noted in the article Natural gas remains under pressure as supply concerns limit recovery potential, will lead to a decline toward $3.26–3.20, where buying activity may increase. A break below the latter level will intensify bearish pressure.

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