Natural Gas Market Update – 02/27/2017

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Storage Report – 02/23/2017

Thursday’s storage report cited a withdrawal of 89 Bcf, slightly higher than expectations of an 85 Bcf withdrawal. As a comparison, last year’s withdrawal for the same week was 131 Bcf, and the 5-year average reduction is 158 Bcf.

Working gas in storage was 2,356 Bcf as of Friday, February 17th, 2017, according to EIA estimates. Inventory was reported at 261 Bcf (-10.0%) less than last year at this time, and 156 Bcf (+7.1%) above the 5-year average of 2,200 Bcf.

Natural Gas Trends:

March NYMEX: Moved off the board Friday, February 24th, settling the month at $2.627/Dth.  As a comparison, March 2016 NYMEX closed at $1.711/Dth, and the 3-year average settle price for March is $2.411/Dth. However, down 76.4 cents from February 2017’s NYMEX settlement of $3.391/Dth.

April NYMEX: Trading closed Thursday at $2.749/Dth, up 4.8 cents from Wednesday’s close of $2.701/Dth. Over the last month, APR17 has traded as high as $3.499/Dth and as low as $2.641/Dth.

Seasonal Strips:

The current summer strip (APR17-OCT17) settled Thursday’s trading at $2.907/Dth, down 21.5 cents from a week ago. This coming year’s winter strip (NOV17-MAR18) settled Thursday at $3.177/Dth down 20.2 cents from last week.

12 Month Strip: Settled Thursday at $2.973/Dth, down 40.0 cents from the month prior. As a comparison, the strip was trading one year ago at $2.144/Dth.

Summary:

Dozens of record temperature highs were broken throughout the country in the past week, with daily highs coming in 20-40 degrees above average for the eastern two thirds of the country. Hopes for any consistent cold, to end winter have most certainly diminished, with weather models currently favoring an extended warmer than normal scenario through March.

Natural gas rig count continues to raise, now up 51.5% year-over-year. Supply is waiting to catch up to the increase of rigs, as it is currently down 3.9 Bcf/d y-o-y, while consumption is significantly down (-11.4 Bcf/d y-o-y).

Unseasonably warm weather has dominated much of 2017, reducing demand and cutting withdrawals 17% below the 5-year average. These fundamentals have weighed heavy on natural gas prices, which have slowly retreated across the board to near six month lows. Prompt month gas has sharply fallen 37.7 cents just from last Wednesday’s (02/15/17) high of $2.994/Dth. Long term prices have also shown weakness, as calendar strip prices out through 2025 are all currently trading sub $3.00/Dth.

 

Natural Gas Market Update – 02/27/2017