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Natural Gas Futures Slip as Traders are Focusing on Shrinking Storage Deficit; Cash Increases

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  • The Natural Gas network was badly affected after Russia and Ukraine Wars. 
  • Worst Weather conditions are among the major factors affecting Natural gas supply and demand.

Natural gas futures mostly continue to trade during the mid-week, with no major variations in the supply/demand balance, allowing prices to move decisively one way or another. In place of expectations for another massive storage, injection sent the November Nymex contract down 16.1 cents day/day to $6.435/MMBtu. December futures fell 16.2 cents to $6.766.   

The prices of Spot gas rose rapidly on 12 October Wednesday, Operated by a wet, chilly weather system operating across the country. NGI Spot Gas National Average rose 30.5 cents to $5.795. 

While weather models persisted in bringing the two-week outage into clear focus Thursday, the government inventory report was anticipated to provide the next catalyst for prices.   

Almost all market expectations were for a build in the 120s Bcf to 130 Bcfs, potentially setting up another all-time fall record if it came in higher than last week’s 129 Bcf build.   

In every manner, it is likely to crush the five-year average injection of 82 Bcf and continue to chip away at the three digital storage deficits that have plagued the market all summer. 

 According to the Energy Information Administration (EIA), as of September 30, inventory stood at 3,106 Bcf, down 165 Bcf from the year-ago level and 264 Bcf below the five-year average.

 Prior to Thursday’s EIA report, a Bloomberg poll of nine analysts altered widely, with injection estimates ranging from 85 Bcf to 137 Bcf. The average in that survey was 127 Bcf. An initial survey conducted by a panel of 23 analysts found a tighter range with an average injection of 126 Bcf.

Although at this time, there are many possibilities to trouble and badly affect the U.S gas markets.

In the following, Russia intensified its war using missiles and attacks on Ukraine. An attack on 12 October caused power outages at a nuclear power plant in the southern part of Ukraine, while other electricity and water supplies were also affected.       

As per reliable media sources, the national electricity company of Ukraine, which is known as “Ukrenergo”  highlighted the cuts “were not applied” in Kyiv.  

European gas markets greatly posted a fresh fall in the fallout of Russia’s attack on Ukraine, with title transfer facility(TTF) prices falling well below month-ago levels.  

Mobius Risk Group reported that the TTF November contract is around $6.50 under the February contract, which is the peak winter contract.

Zane Curry, a gas analyst at Mobius natural gas company, noted that healthy European inventories are “keeping a lid on MMBtus across the pond for now.” Nevertheless, without the Nord Stream pipeline system and with winter fast approaching, the shape of the TTF curve could change dramatically before the end of the year.

Zane also underlined that “Mother Nature has also helped the beleaguered European continent with month-to-date October temperatures considerably warmer than normal widespread.” 

Zane also talked about “How the broader continent fares this winter will be closely followed by global energy market participants as products such as diesel, coal, liquefied petroleum gas and – strangely – even wood pellets, are likely to be impacted by the power and natural gas markets in key consuming countries such as Germany, France, Italy, and the United Kingdom.” 

One of the NWS weather forecasters said that “On Thursday, cold air flowing southward from Central Canada will produce favourable conditions for light snow to develop over parts of the Upper Mississippi Valley, starting overnight Wednesday to Friday,” 

The covering of Clouds is likely to cause more destruction in the south way of the border. The decline in demand for gas is already registered earlier because the summer is approaching closer.  

 Wood Mackenzie said that till 12 October, the U.S- to-Mexico pipeline export decreased and is at 5.5Bcf/d. This also mirrors a slight cut of around four percent from September. This is the reason for the decreasing volume in the last three months.    

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