Natural Gas Market Update – 12/09/2016

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Storage Report – 11/10/2016

Thursday’s storage report cited a withdrawal of 42 Bcf, higher than expectations of a 35 Bcf build.

As a comparison, last year’s withdrawal for the same week was 69 Bcf, and the 5-year average is a 76 Bcf decline.

Working gas in storage was 3,953 Bcf as of Friday, December 2nd, 2016, according to EIA estimates. Inventory was reported at 51 Bcf (+1.3%) more than last year at this time, and 254 Bcf (+6.9%) above the 5-year average of 3,699 Bcf.

Natural Gas Trends:

December NYMEX: Moved off the board Monday, November 28th, settling the month at $3.232/Dth. As a comparison, December 2015 NYMEX closed at $2.206/Dth, and the 3-year average settle price for January is $3.240/Dth.

January NYMEX: Closed trading Thursday at $3.695/Dth, up 9.2 cents on the day. Over the last month, JAN17 has traded as high as $3.775/Dth and as low as $2.772/Dth

Seasonal Strips: This year’s remaining winter strip (JAN16-MAR17) settled last Thursday at $3.547/Dth up 6.1 cents from last week. Next year’s summer strip (APR17-OCT17) settled Thursday’s trading at $3.413/Dth, up 9.5 cents from a week prior.

12 Month Strip: Settled Thursday at $3.492/Dth, up 63.7 cents from a month prior. As a comparison, the strip was trading one year ago at $2.347/Dth.

Summary:

After a record warm fall, it seems as though winter has arrived. An arctic blast is currently migrating across the country, but a second one next week is expected to be even colder. Temperatures are foretasted to be 30 degrees colder than average for much of the continental U.S. over the next two weeks, increasing demand for this period. However there is some debate whether the colder than normal temperatures will stay beyond the next two weeks.

Natural gas prices have recovered from lows in November and this week have surged to their highest levels since December of 2014. The market has shown a lot of volatility this week with the cold weather ahead. After posting a five day high on Tuesday of $3.73/Dth, the market closed down 13 cents Wednesday to $3.603/Dth, and then rallied again Thursday back up to $3.695/Dth. Given the expected cold circumstances over the next couple of weeks, analysts are expecting withdrawals of 130 Bcf next week, and 230 Bcf the following week. If these forecasts prove to be true, storage levels will likely erase surplus levels to last year, and possibly eliminate away even the 5-year surplus, that we have seen most of this year. The psychological impact of eliminating the surplus position could keep upward pressure on the near term prices.

 

Natural Gas Market Update – 12/09/2016