Natural Gas Storage
Withdrawals Just as Expected
Last week’s Energy Information Administration reported an 87 BCF withdrawal from natural gas stockpiles. The market had predicted a similar withdrawal amount, so there was little market movement as result of the latest storage report. The reduction was well below last years’ 126 BCF withdrawal as well as the 5-year average of 98. Currently, we are slightly above (2.1%) the 5-year average.
The story to watch these next few months is, “what will oil and natural gas production look like?” Last week, 87 natural gas rigs were in production, well below the 225 rigs in operation for the same period one year ago. As we’ve discussed in previous Energy Outlooks, technology (fracking and horizontal drilling) have had a major impact on natural gas production.We should watch what impact the new Administration has on production and more specifically on imports and exports. A noticeable shift could significantly impact market stability.
Weather Forecast: Warmer Near-Term Temperatures Across the Entire Continental U.S.
Weather forecasts are predicting above normal temperatures across the country for February. As for the remainder of winter, March and April are projected to bring warm temperatures for the south and east coast. Only the states bordering western and central Canada will experience below normal temperatures.
Over the past two weeks we have seen warmer weather predictions drive natural gas prices down. We should expect more of the same for the next few weeks; barring any changes from other market influencers.
The December Rally Has Ended
Predicted warmer temperatures and stable storage levels are trending natural gas prices downward. Natural gas prices are trading lower than the 100-day average, which is a great trend especially in the middle of winter. March is trading at $3.20/MMBtu. Other common natural gas contracts are at:
- 12-month strip @ $3.40
- 24-month strip @ $3.30
- 36-month strip at $3.15
- 48-month strip is under $3.10
Electric prices were trending downward the last week of January and saw a slight tick up in early February.
Natural Gas Prices Resisted Last Month's Upward Movement
Warmer weather and stable storage levels are the headlines for this Energy Outlook. These two market drivers are keeping prices low, stable and trending slightly downward. Near-term markets will find it difficult to reverse the trend and push prices higher. Unless weather predictions prove wrong (always a possibility), natural gas prices should remain stable for February.
You should be looking at your electric contracts now, ahead of this summer’s peak demands. Recent gas markets are impacting electric prices and moving them in the right direction.