Natural gas prices today plunged following release of the EIA weekly storage report which came in at a 216 Bcf withdrawal, near the lower end of the pre-report estimated range.
While storage withdrawals over the past 3 weeks have been large, they have been unable to actively draw down domestic supplies needed with the increase in production. U.S. production of natural gas continues to grow with daily production adding an additional 4-8 Bcf of supply onto an already oversupplied market.
The combination of lower demand and increased supply have led some analyst's to predict storage could reach 4,600-4,700 Bcf by the end of 2015. If correct, this would have U.S. gas supplies 400-500 Bcf above available storage space leaving excess gas supplies to be dumped on the cash market depressing prices even more.
Lower gas prices should entice power generation buying of natural gas by the utilities but this might not be enough to decrease stockpiles to more manageable levels.
With 9 weeks left in the current withdrawal season, time is running out for potential weather demand leaving the market is a situation very similar to 2012 when spot prices fell to a 1.906 low in April.
Weather forecasts in the eastern U.S. could increase gas usage but weather demand will need to rapidly increase or the natural gas market could be setting up for substantial downside price break in upcoming trade.
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