Natural gas slides below $3.00 as EIA inventory surprise deepens bearish pressure
Natural Gas is down approximately 2.4% on October 30, trading around $2.96/MMBtu and continuing its decline after yesterday's break below support at $3.04–3.05. On the 4H chart, prices have fallen below the psychological $3.00 level for the first time in recent weeks, confirming the continuation of the downtrend from October highs around $3.55–3.60.
Higher inventories and warmer forecasts weaken demand outlook
The main catalyst for the current decline has been a combination of a larger-than-expected increase in U.S. natural gas inventories, recovering production, and revisions to weather forecasts toward higher temperatures in early November. As a result, the market has begun to scale back expectations of a rapid transition to a seasonal deficit, despite persistent risks of disruptions to international LNG supplies.
EIA data reveal persistent regional storage imbalances
The weekly EIA report released on October 29 was noticeably more bearish than preliminary expectations. For the week ending October 23, U.S. natural gas inventories increased by 80 Bcf, compared with a consensus forecast of approximately 70–75 Bcf and the previous build of 77 Bcf. Total working gas in underground storage reached 3.724 Tcf, which is 147 Bcf, or 3.8%, below last year's level but 38 Bcf, or 1%, above the five-year average.
Crucially, the weekly injection exceeded the corresponding seasonal average of approximately 77 Bcf for the first time since early August. This ended a prolonged series of relatively modest inventory builds that had previously allowed the market to anticipate a gradual reduction in the surplus. The increase in South Central inventories was particularly significant, with a weekly injection of 43 Bcf, including 23 Bcf into salt storage facilities.
Nevertheless, regional inventories remain 2.3% below the five-year average, while the deficit in salt storage facilities stands at approximately 11.6%. Thus, the report weakened the bullish case at the national level but simultaneously confirmed the persistence of certain regional imbalances that could become important again with the arrival of sustained cold weather.
Downside risks persist despite Middle East tensions
Despite continued tensions in the Middle East, the near-term outlook for NATGAS has deteriorated significantly, with support around $2.90–2.85 potentially becoming the next target for bears following the break below $3.00. A return above $3.05 would allow bulls to test $3.15–3.20, but renewed selling, as I warned in the article Natural gas faces renewed breakdown risk as $3.04 support comes under pressure, remains possible on rebounds.
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