Natural Gas Storage
Larger than Expected Injection Pushed Prices Down
The market expected a storage injection of 69 BCF last week. Then the U.S. Energy Information Administration (EIA) reported an increase of 80 BCF; 16% higher than forecasted. It’s not uncommon to see gas withdrawals this time of year, but this latest injection pushed prices down under the $3 /MMBtu threshold. Current storage levels are at 3,680 Bcf, 2% above last year and 5.9% above the 5-year historic average.
Current storage levels stand at 3.6 Tcf and are tracking towards 4 Tcf as we head into the winter heating season.
Weather Forecast:90-Day Outlook - Expect Above Normal Temperatures Again
The National Oceanic and Atmospheric Administration continues to predict above normal temperatures over their 3-month forecast for the entire country, except in the South East which is predicted to experience normal temperatures. Areas of the South West, in particular New Mexico and Arizona, are predicted to see temperatures well above normal.
In October, the northeast states (New York, Vermont, New Hampshire, Michigan, Northern Pennsylvania and Ohio) are predicted to experience well above normal temperatures. The remainder of the country should feel above normal temperatures while the southern Rocky Mountain states should experience normal October temperatures.
In a contrasting prediction, the Natural Gas Supply Association is predicting temperatures will be 12% colder this winter compared to last winter. The NGSA predicts the colder winter will drive gas demand up 3.6%. Last winter, we experienced the second warmest winter in history. This winter, the NGSA is predicting residential demand will drive consumption upward.
Storage Report Imact Stronger Than a Hurricane
Immediately following last week’s strong storage report, NYMEX fell 2¢ dipping under the $3.00 threshold, before it rebounded back to $3.049/MMBTU.
Hurricane Matthew devastated many Caribbean Islands and impacted the eastern coasts of Florida and the Carolinas. However, its high winds and rain did not have much impact on the oil and natural gas producing regions in the Gulf. Analysts are stating that the oil and natural gas supply saw little impact from Matthew. End user demand experienced a much greater decline, as major manufacturing plants on the coast shut down and residents and local businesses evacuated the region causing a drop in demand. Typically, hurricanes drive prices upward, but Matthew may have had the opposite effect, causing demand to drop while supply dipped only slightly.
Winter prices look to see the normal ramp-up in November through March. Analysts are expecting to see a price run-up of at least 30¢/MMBTU in the daily spot market. The wildcard is the weather. If the NGSA is correct in its prediction of much colder winter temps, prices could climb much higher.
Natural Gas PricesInch Up Slightly With Strong Storage KeepingPrices in Check
This past week was busy with activity in the natural gas markets. A surprising strong storage report and a near miss from a hurricane had the market on edge. We dodged a big punch when Hurricane Matthew missed the oil producing region.
Natural gas storage is building and poised to provide relief for this coming heating season. The wildcard is, as usual, the weather. We have several conflicting temperature predictions. In the end, Mother Nature will have the last say in what happens to energy prices.
We should be aware that the energy markets and investors in energy production have taken a beating the last year or two from the warm temperatures. They are hoping for any signal to run prices up and recover some of their losses.