As traders weighed a bearish weather outlook domestically against new developments on the overseas supply crunch, natural gas futures fell sharply in early trading Monday. The November Nymex contract was down 24.0 cents to $5.170/MMBtu at around 8:45 a.m. ET.

NGI Morning Natural Gas Price & Markets Coverage

The major weather models experienced some volatility over the weekend, according to Bespoke Weather Services. The American and European datasets showed a significant drop in demand on Saturday before reversing course Sunday to leave the outlook “close to unchanged” overall.

“Amidst the chaos in the modeling, the overall theme of a lower demand regime holds, as any variability we are seeing, even in the cooler model runs, simply brings us close to normal for a few days here and there,” Bespoke said.

The latest forecast as of early Monday would put the current October on track to have the lowest weather-driven demand of any October in the firm’s dataset going back to 1980.

The November contract dropped as low as $5.099 in after hours trading over the weekend. However, it pared its losses on weather model runs showing stronger demand and “supportive European pipeline auction data,” according to EBW Analytics Group analysts.

“Support from international prices occurred as a key European pipeline auction signaled no extra Russian transit capacity to Europe for November,” the EBW analysts said. Even so, “natural gas continues to slip this morning. Weather-driven demand remains anemic…weakening spot demand and allowing inventories to rapidly build.”

The mild weather in the Lower 48 is increasing the contrast between the domestic market outlook and the supply crunch overseas, according to Bespoke.

“It is still too soon to completely detach from the situation over there, but every warmer week we have here in the U.S. brings us closer to such a detachment,” Bespoke said. “We are simply not in peril as they are over there, barring a massively cold winter, not just with passing cold shots, but sustained cold.”

Henry Hub futures could still see “a burst higher” at any moment, according to the EBW analysts. However, the front month “appears likely to repeatedly test lower.” Any failures to hold at technical support levels could increase the chance of prices testing the psychologically significant $5 barrier, the analysts added.

ICAP Technical Analysis analyst Brian LaRose pegged $5.168 as a key support level the bulls will need to hold going into the start of the new work week.

“If they can, there is still a chance for another run at the $6.466 high,” LaRose said in a note to clients. “If they can not, a dump to $4.947-4.921, $4.666, or worse could be on tap as we head into the end of October.”

November crude oil futures were up $1.21 to $83.49/bbl at around 8:45 a.m. ET.