Goldman: "Keep Pressing" NatGas Shorts Amid Weakest October Demand In 61 Years

Mild weather across the Lower 48 has limited natural gas demand, keeping futures in a bearish sideways trend below $3 per million British thermal units. Goldman's Thomas Evans noted that October's unusually warm weather has led to the third-lowest Heating Degree Days since 1963. Evans expects total demand to recover through the end of the month but remains uncertain about winter weather and production. He advised clients to consider selling December $2.25 puts to own $3.25/$3.75 call spreads, given the potential for a warm November to roll into a colder December. The January/April spread is currently pricing weaker than last year, despite similar conditions. Evans also noted that the April/October spread might be a better sell than the January/April, given concerns about cash pricing in the shoulder season. A separate note from the Energy Information Administration and the Natural Gas Supply Association forecasted colder winter weather trends for the Lower 48. The EIA and NGSA project a 14% increase in residential and commercial demand and a 7% increase in industrial demand due to colder temperatures. Natural gas futures trading in New York has been range-bound for nearly two years due to lower demand and abundant supplies. The latest data shows average temperatures for the Lower 48 sliding down the 30-year trend line, indicating that winter is ahead.