Mild Weather Wreaks Havoc on Natural Gas Demand

The natural gas market has been facing a significant downturn, driven primarily by the unexpected mild weather across much of the United States. Forecasts for October showed temperatures in the 60s and 80s, limiting the need for heating and dampening overall demand. While some regions near the Canadian border experienced cooler conditions, the mild temperatures in the southern states, particularly Texas and the Southwest, kept national demand weak. This weather factor has traders focused on selling into short-lived rallies, with resistance at $2.610 remaining a significant technical level.

Weathering the Storm: How Mild Temperatures Disrupted the Natural Gas Market

Mild Weather Cools Demand

The key driver behind the continued decline in natural gas prices was the unexpectedly warm weather across much of the United States. Forecasts for October showed temperatures in the 60s and 80s across most regions, reducing the need for heating and limiting overall demand. Only areas near the Canadian border experienced cooler conditions, briefly spurring demand in the Midwest and Northeast. However, the mild temperatures in southern regions, especially in Texas and the Southwest, kept national demand weak, with traders focused on selling into short-lived rallies. The resistance at $2.610 remained a significant technical level, with both the 50-day and 200-day moving averages well above current price levels.

Hurricane Milton's Demand Destruction

Adding to the bearish trend earlier in the week was Hurricane Milton, which disrupted natural gas markets. The Category 4 storm knocked out power to millions of homes and businesses in Florida, a major consumer of natural gas for electricity generation. Although the hurricane did not impact production areas in the Gulf of Mexico, the sharp reduction in demand weighed heavily on prices. As power was restored, prices attempted to stabilize, but the overall supply-demand balance remained unfavorable for any sustained price recovery. Traders responded with short-covering and profit-taking toward the end of the week as cooler temperatures briefly boosted demand.

Storage Levels Exacerbate the Pressure

Further weighing on the market, the latest U.S. Energy Information Administration (EIA) storage report showed an injection of 76 billion cubic feet (Bcf) for the week ending October 11. While this was slightly below seasonal norms, it still pushed the total working gas in storage to 3,705 Bcf—107 Bcf higher than last year and 163 Bcf above the five-year average. These elevated storage levels limited any upside potential, reinforcing the bearish tone despite the impending winter heating season.

Navigating the Bearish Landscape

The combination of mild weather, Hurricane Milton's demand destruction, and elevated storage levels has created a challenging environment for the natural gas market. Traders have been focused on selling into short-lived rallies, with resistance at $2.610 remaining a significant technical level. The overall supply-demand balance has remained unfavorable for any sustained price recovery, with the market exhibiting a bearish tone despite the approaching winter heating season. Industry participants will need to closely monitor weather patterns, storage levels, and other market indicators to navigate the current landscape and position themselves for potential opportunities.