Natural Gas Market Update – 11/11/2016

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Storage Report – 11/10/2016

Thursday’s storage report cited an injection of 54 Bcf, slightly higher than expectations of a 50 Bcf build. As a comparison, last year’s injection for the same week was 55 Bcf, and the 5-year average is 38 Bcf.

Working gas in storage was 4,017 Bcf as of Friday, October 28th, 2016, according to EIA estimates. Inventory was reported at 47 Bcf (+1.2%) more than last year at this time, and 189 Bcf (+4.9%) above the 5-year average of 3,828 Bcf.

Natural Gas Trends:

December NYMEX: Trading closed Thursday at $2.632/Dth, down 5.8 cents from Wednesday’s close of $2.690/Dth. Over the last month, DEC-16 has traded as high as $3.556/Dth and as low as $2.546/Dth.

Seasonal Strips: This year’s remaining winter strip (DEC16-MAR17) settled Thursday at $3.122/Dth, down 6.3 cents from a week prior. Next year’s summer strip (APR17-OCT17) settled Thursday at $2.877/Dth, down 7.9 cents from last week.

12 Month Strip: Settled Thursday at $2.855/Dth, down 47.4 cents from the month prior. As a comparison, the strip was trading one year ago at $2.554/Dth.

Summary:

A cold shot for the Northeast and Great Lakes regions is expected to take place between now and Tuesday. Temperatures in the regions will fall as low as the 20’s and 30’s, which creates the potential for the first snowfall of the season. The cold air blast will likely bring the coldest temperatures for these regions, so far this year, but is expected to only last about a day and a half to two days, once it hits. A return to above average temperatures is foretasted by mid week. Once again, the 6-14 day outlook favors warmer than normal temperatures for almost the entire continental U.S.

Current weather models show November to end with temperatures that are 18% higher than the 10 year average. A warmer than normal October and start to November has already driven market bulls to sell off long positions, which has plummeted the natural gas market over the past three weeks. November is typically the first month of the heating season, but the mild weather has limited demand allowing for additional injections beyond October 31st, the traditional end to the injection season. This week’s injection has put inventory at 4,017 Bcf, officially surpassing the previous record of 4,009 Bcf, set last year. Until consistent cold weather and increased natural gas demand occurs, natural gas prices would be expected to remain under pressure.

 

Natural Gas Market Update – 11/11/2016