Natural gas struggles below $3.22 as EIA storage data approach
Natural Gas is trading around $3.16–3.17/MMBtu on November 5, attempting to extend its recovery after declining to local lows near $2.95–3.00. On the 1H chart, prices have moved above the main short-term and medium-term moving averages, but encountered renewed selling pressure after reaching $3.21–3.22.
The December Natural Gas contract on NYMEX closed on November 4 near $2.96/MMBtu, gaining approximately 2.2%, and was trading around $2.93 on the morning of November 5. U.S. prices received support from colder weather forecast revisions and reports of declining gas production. However, relatively comfortable inventories ahead of the heating season continue to limit interest in aggressive buying.
U.S. storage forecasts point to another substantial build
The main event of today's trading session will be the release of the EIA's weekly U.S. natural gas storage report for the week ending October 30. According to the consensus forecast, gas inventories could increase by approximately 81 Bcf, while some analytical models predict an 82 Bcf build. For comparison, the October 29 report showed an 80 Bcf increase in inventories to 3.724 Tcf.
This is 147 Bcf, or 3.8%, below the year-ago level, but 38 Bcf, or 1.0%, above the five-year average. Of particular interest is the South Central region, where inventories reached 1.168 Tcf after a weekly increase of 43 Bcf, but remained 2.3% below the five-year average.
Regional supply imbalances complicate the market outlook
Thus, despite the overall surplus in U.S. inventories relative to seasonal norms, regional gas supplies remain uneven. If today's data confirm an inventory build of approximately 81 Bcf, the surplus over the five-year average could widen to around 58 Bcf, adding pressure to prices.
However, an actual figure below expectations could support buyers, as the market has already priced in the possibility of a relatively large storage build. In its October Short-Term Energy Outlook, the EIA expected inventories to end the month at around 3.850 Tcf, approximately 2% above the five-year average. Consequently, the U.S. market is entering the heating season without an obvious shortage, although further price dynamics will depend on how quickly the market shifts from gas injections to withdrawals.
Bulls face a decisive test at $3.20–3.22
Ahead of the EIA report, NATGAS prices rebounded toward resistance around $3.20–3.22, but bulls failed to break through it on the first attempt, indicating continued downside risks toward at least $3.10–3.00. However, as I noted in Natural gas tests $3.19 resistance as supply cuts support recovery, a decline in inventories could help prices break through resistance and rise toward $3.30–3.35, where bulls may encounter renewed selling pressure from bears.
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