Natural Gas Storage
Withdrawals Lower than Expected
December brought us a few cold spells and predictions of another arctic blast. Many analysts predicted a large storage withdrawal for the last week of 2016. Some predicted the withdrawal to be as high as 131 BCF and as low as61 BCF. When the EIA storage report was posted with only a 49 BCF withdrawal, the market reacted as expected and dropped as much as 10¢ in the prompt month and 4-5¢ in 12-month strip prices.
The bad news is that storage levels have dipped under the 5-year average for the first time in 20 months. Much of the reduced storage levels can be attributed to reduced production and rig counts as well as higher LNG exports.
Weather Forecast:Warmer in the South and East; Colder in the North and Northwest
January looks to deliver colder than expected temperatures in the Pacific Northwest and warmer than expected temps in southern and Atlantic coastal states. The Mid-Atlantic region in particular, is expected to feel temperatures well above normal.
For the duration of winter, regions along the Canadian border (western and central states) are predicted to be the only areas experiencing colder than normal temperatures. The southern tier and east coast are projected to feel above average temperatures. Southern Texas and New Mexico have the greatest odds of experiencing above normal temperatures.
The December Rally Has Ended
In December, colder temps gave support to the market and pushed prices upward. Prices rallied to 2-year highs in December after extreme weather predictions and the threat of a new artic freeze to hit in January across most of the US. This recent storage report and a revised forecast of mild temperatures halted the two week rally and sent prices downward.
The natural gas prompt month is trading at $3.20/MMBTU with the 12-month fixed priced strips just a few cents above it.
The last few months have shown us just how volatile the energy markets can be. NYMEX spot prices on November 9th were as low as $2.55/MMBTU, then rose to $3.99 on December 29th and back down to $3.17 on January 4th. What a wild ride it’s been.
Long-term prices have also dropped. You can still lock-in fixed prices at a great rate.
Natural Gas Prices Jumped and Now Have Dropped
If you missed locking in your energy before Thanksgiving, you have been given another chance following the market rally in December. The market could not support the higher prices and has fallen back.
Gas prices are not as low as November, but they have dropped down considerably. We have recently seen much greater price volatility in the market than in the last few years. The market is trying to rally, but hasn’t found sustainable support so far. We should be cautious over the coming days and weeks that prices will jump up and stay up.
Again it’s your decision: Lock in a fixed price now or hope Mother Nature is going to be kind to us.