NG Update

It was a bit of a scary week with all the cold weather. Natural gas spot price kept going up, reaching 4.25, but the November futures kept bouncing off 5.10 or so. Luckily, last Thursday's Storage Report showed a larger-than-expected 69 bcf net increase in stocks, reaching a total of 3658 bcf for Oct.2, which I think helped keep the ceiling on the futures price, as I had hoped it would do.

I've been watching the weather forecast all week, here: http://www.weather.gov/forecasts/graphical/sectors/conus.php?element=T

(Turn off "Table Mouseover Effect", click +12 hrs if necessary to show "High" Temperatures", click the word "High", then use the "Next Image" buttons at the bottom to view each day's forecast up to a week ahead).

A week ago you could see that the cold weather would end around today (Wednesday), which turned out to be correct, and now for the next week it looks like it will be much warmer.

Natural gas prices have dropped quite a bit the last two days. Spot price is now at 3.80 and November price is 4.44. People think the drop was primarily related to news that UNG will begin to move its investments out of futures to other instruments due to anticipated regulatory restrictions and position limits on futures trading. See this article for more details:

http://online.wsj.com/article/SB125544223957682433.html

The weekly storage report gets released tomorrow (data is for the week up to Oct.9), and it should show the total stocks are above 3700 bcf, which I think will scare people.

Looking at the detailed historical data provided by the EIA, storage usually tops out between Oct.25 and Nov.16, most often right around Nov.7. I'm predicting that this year's storage will probably top out around 3900 bcf, based on historical patterns and extrapolating for this year. If this happens, certain regions will likely reach their maximum capacity and not be able to take any more natural gas.

So the fundamentals look perfect for a further drop in natural gas prices over the next couple of weeks... at least to me. However, all the trading reports I have access to on OptionsXpress keep saying everything looks bullish, there is strong support, prices are set to rise, etc.