Natural Gas futures recovered slightly at the end of the trading session on Friday, after falling -13.5% from a high of $4.54 on Monday to a low of $3.93 on Friday.
Natural gas prices declined after initial expectations of milder weather coming next week. However, latest forecasts expect freezing temperatures to continue next week.
Based on the weather forecast across all the U.S. (Pocketistics indicator) and to get a perspective of the temperature decline expected, we have compared the following days with the last 5-year average from 2009 to 2013.
As we observe, the following days will be significantly below the 5-year average temperature, and also below the minimum seen in the period. We expect storage levels to decline accordingly, seeing the first withdrawals in the following report for the week ending on Nov 14th, and a heavy withdrawal for the week ending Nov 21st, which we expect will bring storage levels back to a -10% under the 5-year average.
Natural gas future prices have been declining during the summer, as injections have been strong, but storage levels have not yet fully recovered from the record withdrawals of the beginning of the year and continue at levels below the 5-year average. Analysts expected a full recovery before the withdrawal season started but that will not happen as next weeks will bring the levels even lower.
Net long positions held by Money managers in four U.S. natural gas contracts (Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract) had declined in the recent weeks, but started to pick up since the beginning of the month, and increased 53% in the week ended Nov. 11th.
Finally, we see that production has been strong but consumption has been stronger, at the same time we see imports declining and exports increasing, bringing Net flows to its lowest level since 2008, as of August 2014. 
For production to keep increasing, we expect prices will have to rise to support higher investments.
We do not advise on taking any position in natural gas, but we do not see fundamental reasons to believe that prices can continue declining.