Heading into its first full session as the front month, November natural gas futures sold off in early trading Tuesday as analysts pointed to weakness in the physical market as a source of downward price pressure. 

AM markets

The November Nymex contract was down 11.8 cents to $2.677/MMBtu at around 8:50 a.m. ET.

The early selling Tuesday followed a volatile last day of trading for the October contract, which traded as high as $2.176 and as low as $2.020 before rolling off the board Monday at $2.101.

“While volatility is not unusual on the day the front month expires, Monday’s erratic trading was due in part to pipeline outages at Sabine Pass and Corpus Christi, which reduced feed gas flows by nearly 1.4 Bcf/d from weekend levels,” analysts at EBW Analytics Group said. “Coupled with the continued shutdown of Cameron and Cove Point,” this dragged down Henry Hub prices in the physical market.

Weak cash market prices “could keep a lid on the November contract for several more days,” according to EBW. However, liquefied natural gas feed gas flows are expected to “rise sharply in another week or two,” potentially boosting prices for the newly installed front month.

Overnight data from both the Global Forecast System (GFS) and European weather models dropped degree days compared to Monday’s outlook, according to NatGasWeather.

Following an early season cold shot over the Midwest and East this week, a “more bearish U.S. pattern” is expected to set up starting next Monday through Oct. 12, the forecaster said. 

“There are still ways cool air sneakily continues into the northern U.S.” next week, “as the GFS continues to tease, but for now, the weather data still isn’t hot or cold enough” during this stretch, NatGasWeather said.

As for the price outlook, the forecaster said it will be watching to see how November trades given that it is “much more expensive” than the October contract at expiration. “One thing we do expect is daily 10-cent-plus moves to continue.”

Forecasts may show milder temperatures for later this month, but in the interim weather during the current week is poised to produce an unseasonably large bump in demand in the Midwest, according to Genscape Inc. The firm’s modeling shows demand peaking in the region this Friday, when cold is expected to push demand up to 6.8 Bcf/d.

“Prior to mid-October, Genscape models typically show Midwestern residential/commercial demand ranging between around 1-3 Bcf/d before ratcheting up in mid- to late October toward the 3-6 Bcf/d range,” Genscape analyst Matt McDowell said. This Friday’s projected demand total would arrive “nearly two weeks before this level of demand has been seen in the last five years and almost a month before these values fall in line with seasonal residential/commercial demand averages.”

November crude oil futures were down 20 cents to $40.40/bbl at around 8:50 a.m. ET, while October RBOB gasoline was off fractionally to $1.2419/gal.