The natural gas market today fell to the lowest spot price level since September 2012.
Today's weekly EIA storage withdrawal came in near the lower end of pre-report estimates totaling just 94 Bcf which was well below the 97-144 Bcf withdrawal expected.
To put today's withdrawal in perspective, it was 125 Bcf or 57% below last year's withdrawal and 74 Bcf or 44% below the 5-year average. Not a bullish signal during the coldest month of the year.
The natural gas market faces another oversupply situation similar to 2012 when the spot price fell to a 1.906 low in late-April if winter heating demand doesn't quickly escalate.
Today's EIA storage report showed 2,543 Bcf of gas in storage for week ended 01/23/15. With 9 weeks left in the current withdrawal season, an average of 108 Bcf of gas per week will need to be pulled out of storage to reach the 10-year average for end of March storage of 1,565 Bcf.
Over the past 10 years, an average of 114 Bcf has been withdrawn from storage over the next 9 weeks which could keep the market from trend too much lower from the current price level.
However, the difference this year is increased production which is adding a extra 2-3 Bcf per day onto the market. This could put an additional 150-160 Bcf of supply into the market depending on upcoming demand by the end of March.
The bearish headwinds facing the natural gas market over the upcoming 9-10 weeks of trade are daunting. Seasonally, the market tends to set a post-winter low during the months of March or April. This time period should be the best opportunity to add to summer coverage.
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