Last week’s cold weather across the majority of the Lower 48 ended up yielding a bullish -134 Bcf withdrawal, which exceeded the market expectation of 109 Bcf, last year’s draw of -46 Bcf, and the five-average of -49 Bcf for around the same time period. Large swings in the front month NYMEX contract may have initially been viewed as weather-driven and fundamentally influenced, but a closer look at these large swings in both directions are absolutely the result of technical factors, namely “driven by positioning, short-covering, stop-outs and the follow-through of algorithmic trading on the movements of both of the former”, per analysts at Energy Aspects. Even in the face of a potentially rough withdrawal season ahead, Constellation’s November 2018 Market Intel stated an important facet to consider: “While the front of the gas curve is rallying due to storage concerns and a cold start to November, record gas production is weighing down longer-term NYMEX strips, which are currently trading just off of all-time contract lows.” There’s certainly some breathing room when considering longer term positions and contracts, but it seems that over $4/MMBtu NYMEX winter contract prices are here to stay for the time being.
Working natural gas in storage currently stands at 3,113 Bcf, which is 620 Bcf (16.6%) lower than this time last year and 710 Bcf (18.6%) lower than the five-year average.
The December 2018 NYMEX Futures price began the day around $4.65/MMBtu prior to the report’s release, but has since dropped to $4.52/MMBtu after the report was posted.
Outlook for the Balance of Storage Season:
The graph below compares historical 12, 24 and 36 month strip prices and storage levels for the past 5 years.
The following table shows the injection numbers we will need to average by week to hit selected historical levels:
The following two graphs show current natural gas in storage compared to each of the last 5 years and weekly storage averages and patterns.
The graph below shows the injections through the current week over the past 5 years.
Finally, the graphics below depicts the 6 to 10 day temperature range outlook from the National Weather Service.
Current Week’s Outlook