The NYMEX November natural gas futures contract continued to decline in early trading Friday on an unsupportive weather outlook and ample storage inventories, sources said.
As of 10:27 a.m. EDT (1427 GMT), the contract was trading at $3.372/MMBtu, down 6.2 cents from its close on Thursday.
Sources said a major storm system -- a merging of Hurricane Sandy, wintry weather from the west and cold air from Canada -- is expected to strike the US Northeast early next week. This could cut demand due to potential electricity and refinery outages, according to analysts.
Hurricane Sandy "refuses to die," said Gelber & Associates analyst Aaron Calder, noting that by Monday, "the storm could be right outside [Philadelphia] or it could be out in the Atlantic."
If the storm does materialize as expected, "there should be some decent closeouts [in positions] going on here," Calder said.
The temperature outlook is also bearish for gas, Calder said. Although below-normal temperatures are set to move into the eastern US over the next week or so, "it's not extreme cold," he said, and it will be followed by "strong [above-normal temperatures] in the 11- to 15-day period."
Kilduff Report analyst Mike Fitzpatrick noted that the contract had breached previous support of around $3.40/MMBtu, and additional downside is likely from here.
The contract has traded so far between $3.36/MMBtu and $3.442/MMBtu.
