Technical strength and continued worries of a winter surprise dominated trading Friday of NYMEX November natural gas futures as they ground lower in an oversupplied market, losing 3 cents to settle at $3.766/MMBtu, an 11-month low for the front-month contract.
November gas opened at its high for the day of $3.817/MMBtu, and fell to $3.715/MMBtu in the morning, nearly a 12-month low, before recovering some by the close.
"The technical strength in this market has been crazy strong," Gelber & Associates analyst Aaron Calder said, noting the contract barely budged Thursday after the US Energy Information Administration's gas storage report came in slightly above expectations.
While increasing supply and a lack of weather demand should push prices lower, Calder said "what you are seeing is risk-adverse end-users being very happy to lock in winter gas at $3.75/MMBtu."
"There's an aversion to being exposed to winter," Tradition Energy analyst Gene McGillian said.
Further out on the curve, prices for winter 2015 month contracts also lost a few pennies and all stayed below $4/MMBtu.
"It now appears that the winter strip will remain anchored below $4 until such time that a call on storage occurs," BNP Paribas analyst Teri Viswanath said.
"With supply uncertainty significantly lessened, weather now takes on a heightened role for natural gas balances by driving the call on marginal production and hence, price changes," Viswanath said. "Extreme weather conditions are now required to push prices out of their current narrow-range, low-price doldrums."
The EIA reported a 94-Bcf build Thursday, 15 Bcf above last year's 79-Bcf mark for the October 10 storage week.
The 94 Bcf injection was slightly higher than the 88-92 Bcf expected by analysts surveyed by Platts.
The NYMEX settlement is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT).
