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Natural gas trading outlook: futures slide on bearish EIA report

Natural gas futures extended earlier losses during midday trade in Europe today, as the US reported a massive build of natural gas held in storage, indicating stocks will be well-replenished ahead of winter heating season.

Front-month natural gas futures for settlement in November on the NYMEX traded at $3.930 per million British thermal units (mBtu) by 14:40 GMT, down 2.31% for the day. Prices ranged from $3.930 to $4.059 per mBtu. The contract dropped 2.38% on Wednesday.

The US Energy Information Administration (EIA) reported on natural gas storage levels for the week through September 26th today, logging the weekly build at 112 billion cubic feet, above the expected 105-109 Bcf, prompting a dive for natgas prices. The build was the twenty-fourth straight bigger-than-average injection, and narrowed the deficit to the five-year deficit to just 11.4%, down from 12.5% last week and more than 50% in March.

Analysts had cautioned over a possible trackback of the recent cold-induced rally, as the early heating hype could be short-lived.

“If weather patterns fail to look more intimidating going into the weekend without a bullish EIA number, there should be concerns higher prices won’t hold,” analysts at NatGasWeather.com wrote in a note to clients today. “Expect leaner weekly builds after the next two.”

A set of long-anticipated, and already well priced-in, cooler Canadian systems was on track to lower temps in highly-populated areas in the Midwest and Northeast beginning this weekend, pushing up heating outlooks.

“What’s important is the pattern is conducive to cooler than normal temperatures sweeping across the north-central US … while the West remains quite warm,” the analysts at NatGasWeather.com wrote. “It’s best to expect coming weather patterns to be cooler, but not exceptionally so.”

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