Commodity Markets

Natural Gas Market Update – 2/15/2018

 

Storage Report – 02/15/2018

Thursday’s storage report cited a withdrawal of 194 Bcf, while estimates centered around a 188 Bcf pull. Last year for the same week there was a withdrawal of 120 Bcf and the 5-year average withdrawal is 154 Bcf.

Working gas in storage was 1,884 Bcf as of Friday, February 9th, 2018, per EIA estimates. Inventory was reported at 577 Bcf (-23.4%) less than last year for the same week and 433 Bcf (-18.7%) less than the 5-year average of 2,317 Bcf.

 

 

Natural Gas Trends:

March NYMEX: Settled Thursday down less than a penny at $2.58/Dth.

Seasonal Strips:  The upcoming summer strip (APR18-OCT18) settled Thursday at $2.701/Dth, down 5.0 cents from the week prior. Next year’s winter strip (NOV18-MAR19) settled Thursday at $2.917/Dth down 5.8 cents from last week.

12 Month Strip: Settled Thursday at $2.765/Dth, down 5.9 cents from the week prior.

Summary: This week’s EIA storage report withdrawal of 194 Bcf came in above the projected draw of 188 Bcf and the market displayed little reaction to the news, remaining virtually flat.
Although demand for natural gas has been up over the last few weeks, the market is staring at increased production numbers and a warming trend which should keep prices from increasing. NOAA forecasts for the end of February show a return to normal-to-above-normal temperatures for the eastern 2/3rds of the country immediate to the end of March trading, which is also the end of winter trading.

Natural Gas Market Update – 1/4/2018

Storage Report – 01/04/2018

Thursday’s storage report cited a withdrawal of 206 Bcf, with estimates calling for a withdrawal of 220 Bcf.  Last year for the same week there was a withdrawal of 76 Bcf and the 5-year average withdrawal is 99 Bcf.

Working gas in storage was 3,126 Bcf as of Friday, December 29th, 2017, per EIA estimates.  Inventory was reported at 192 Bcf (-5.8%) less than last year for the same week and 192 Bcf (-5.8%) less than the 5-year average of 3,318 Bcf.

Natural Gas Trends:

February NYMEX:  Settled Thursday down 12.8 cents at $2.880/Dth.  As of this writing the market is trading at $2.784/Dth.

Strips:  With the Bomb cyclone trampling the northeast, warmer weather is just a few months away as the summer strip (APR18-OCT18) settled Thursday at $2.740/Dth, down 6.4 cents from the week prior.

12 Month Strip:  Settled Thursday at $2.809/Dth, down 2.1 cents from the week prior.

Summary:

This week’s EIA storage report came in with a withdrawal of 206 Bcf while estimates had centered around 220 Bcf.  New Year’s Day was a record setter with the U.S. burning 143 Bcf for the day compared to the prior daily record of 142 Bcf consumed during the Polar Vortex of 2014.

We expect there are going to be a few more reports of triple digit withdrawals in the coming weeks which will deplete inventory quickly as the report reflects the prior week’s activity.

The market has all but shrugged off the numbers as we look forward.  The increased demand is already being seen in the spot cash market as suppliers must fill additional gas quantities required.

Weather patterns are changing with more than 75% of the country showing normal to above normal temperatures in the 6-10 day outlook according to NOAA and a continuation of that pattern for the 8-14 day forecast, which should return demand to seasonable numbers.

Production has been hit with well head freeze offs, but is expected to rebound very quickly as the market is looking at last year’s ramp up and record daily production numbers and anticipates that the market will be well supplied through 2018.

Understanding Commodity Markets

Commodity story header

We’ve all been there before. While driving along we notice gasoline prices are lower than usual, so we pull in, top it off, and take advantage, despite the fact that we still have half a tank left. Then, the next morning we drive by that same gas station and see prices dropped an additional 10 cents. Or, we skip filling up and see gasoline prices have jumped 30 cents… So what gives?

The same volatility occurs in the natural gas and electric market. When dealing with commodities we are often damned if we do and damned if we don’t.

Energy prices are constantly on the move, and much like gasoline prices, a myriad of reasons come into play. Supply and demand is not always what moves the market. Factors such as storage levels, weather, a full moon, a trader having a bad day can swing the pendulum. Obviously I joke with the latter two but the point remains, it’s difficult to understand why these movements happen.

In today’s market I would assume that “energy saving” calls have picked up frequency in recent weeks. Why? Because marketers will develop a pitch based on the market being up or down. If the market goes up, they claim it’s a good time to get out. If the market goes down, they claim it’s a good time to get out. According to them, you should always be signing up. Yes, rates today might be lower than last year, but comparing your price then, to today, is not telling the whole story…

Just like mortgage rates, they change over time. Years ago 8% was the norm, whereas rates today are now below 4%. Did you make the wrong decision, pay too much, or get ripped off at 8%? No, at the time that was the market, and markets shift in time.

Buying in a down market is easy, you buy savings but understanding all that lies below the surface within that price is key. Energy components, operational changes, contract terms, program options, are all things to consider when jumping back in. Simply picking a rate is a short sighted reaction to a complexity that goes much deeper.

To learn more about your options, the market, and the things you can do to adjust costs, contact your energy representative. Your business is important, make sure you are asking the right questions. An in depth review and explanation is what it deserves, not just a “pick your price” approach in a commodity world that’s as volatile as the local gas station.