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We’re rapidly heading towards heating season in North America and that means the weather is in focus again. The latest forecasts are for a cool second-half of October and that’s helped to lift front-month natural gas above $3 for the first time since March.

natural gas

I highlighted at the start of the month that October is the best month -seasonally — for natural gas (while it’s the weakness for oil). Some of that is captured in the curve but today’s price action also follows the pattern.

The second driver is US production. The latest data shows that it’s now lower year-over-year, something we’ve been expecting due to falling rig counts. Meanwhile, US demand remains above last year and exports — particularly to Mexico — are growing.

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Natural gas US production — HFI chart

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Today’s weekly natural gas injection number was 86bcf compared to 90b expected and with production down, the number should start to tighten. US inventories are still high and there’s no scope for a return to the $6 levels of late last year but there’s suddenly some life in a market that had been left for dead. What comes next will depend on the weather.

h/t @HFI_Research

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