Natural Gas Storage
Withdrawals Lower than Expected
Analysts were expecting last week’s natural gas withdrawal to be near mid-50 BCF. The EIA reported a withdrawal of 50 BCF, about 10% lower than predictions. Storage levels remain slightly above the same period last year (0.6%) and 6.3% above the 5-year average levels.
Weather Forecast:Cold December - Warm Up in January and February
Much colder than normal temperatures are forecasted for the first half of December. The National Oceanic and Atmospheric Administration predict temperatures to be 5 to 10 °F colder than normal across most of the western half of the US.
The 3-month outlook shows the southern half of the U.S. and the New England Region to experience above normal temperatures. The warmer conditions in New England are important because it may lessen the natural gas pipeline demands into the already constrained region. Only the northern central states will see below normal temperatures.
Colder Temperatures Trump Positive Storage Reports
Just as EIA was posting a positive storage report, a revised weather report showed colder near-term temperatures. The two market indicators were in opposition and the winner was colder temperatures. Typically, a positive storage report pushes the market downward, but the market has been looking for good news to stage a rally for quite some time.The mention of colder temperatures helped surge the market upward with hopes of high demands for home heating. Prior to Thursday’s reports, the spot market was trading at $3.34/MMBtu. After the reports, prices jumped to a high of $3.56.This Indicates that the markets were happy to see above normal temperatures and a chance to sell off their inventory. The enthusiasm was somewhat short-lived, as the markets have softened a bit down to $3.45 on Friday.
Long-term strip prices (Calendar 2017, 2018 and 2019) are up 9¢, 3¢ and 2¢, respectively.
Natural Gas Prices Have Jumped With the Threat of Colder Temperatures
Let’s hope you locked in prices before Thanksgiving – or hope that the cold weather doesn’t materialize and prices move back down.
Gas prices are higher than they were last year with temperatures being the prominent factor driving the market. Until last month, storage levels and mild weather has kept prices down. This past week showed that Mother Nature is still in charge and in full control of our energy costs.