Henry Hub futures slid to about $2.79 per million British thermal units on mild forecasts through late October, while crude oil stayed far above $100 for the global benchmark. The Energy Information Administration reports storage Thursday, with the FMP consensus at an addition of 83 billion cubic feet.
The Gulf shock has lifted oil. U.S. natural gas has gone the other way.
Henry Hub natural gas futures traded at $2.789 per million British thermal units at 1:46 p.m. Eastern, down 5.87% from Tuesday's $2.963 and at the lowest level in a month. Brent crude was near $108.85 over the same hour, with West Texas Intermediate near $97.08.
Why gas fell
The drop follows weather. Forecasts for mild temperatures through late October have weakened the outlook for early heating demand, and futures have extended a downward trend that began as those forecasts turned. Natural gas is the more weather-sensitive of the two fuels in the short run, and a warm autumn reduces the draw on storage just as the heating season begins.
Crude oil is priced on a global market in which supply routes through the Persian Gulf matter. U.S. natural gas is priced largely at home, and its connection to the Gulf is weaker, so the same conflict that has pushed Brent above $100 has not obviously lifted Henry Hub.
The storage test
The Energy Information Administration's weekly storage report arrives Thursday at 10:30 a.m. Eastern. The FMP consensus is an addition of 83 billion cubic feet, against 67 billion cubic feet in the prior report. A larger-than-expected build would reinforce the picture of soft demand.
What it means for inflation
Lower gas prices offset a small part of the energy story in U.S. inflation. Natural gas feeds utility bills and power costs, so a sustained decline would partly cushion the effect of expensive gasoline and diesel on headline price measures. The size of that offset is unclear from a single day's move.
One reading is that U.S. gas is insulated from the Gulf and gives American industry and utilities a cost advantage over buyers elsewhere. The other is that weak gas reflects nothing but weather and could reverse quickly if cold arrives or if demand from liquefied natural gas exports pulls more supply abroad.
What to watch
Thursday's storage figure; two-week temperature forecasts; liquefied natural gas export demand; and whether Henry Hub holds above the current one-month low. A rebound that follows a colder forecast would confirm that the move was a weather call, not a change in the supply picture.