The natural gas market today rallied back up to the top of the past two week trading range as the October 15 contract topped out at a 2.722 intraday high.
Weather forecasts late last week were generally bearish as a below-normal temperature area spread across the upper Midwest. Forecasts today turned back toward a supportive outlook with above-normal temperatures now expected across much of the eastern U.S.
Weather forecasts and a hotter than expected August which has continued into September have been the primary factors keeping the market range bound although the back end of the forward price curve has been trading down to new all-time lows.
Current gas in storage of 3,193 Bcf is on pace to challenge the peak storage high of 3,929 Bcf reached in 2012. Storage has been the negative factor facing the market as injections over the past summer, while below last year's record high level, have remained high surpassing the 5-year average each week except four occasions since early-April.
On the production front, the natural gas rig count remains at 202, an all-time low according to Baker-Hughes. Production has been averaging between 72-73 Bcf per day (dry-gas) since early-June possibly indicating the declining rig count finally matters.
Increasing storage and decreasing weather-related demand is expected to lead to further weakness in the market as it enters the post-summer "shoulder" season.
The sideways trend that has been in place since the late-April spot contract low has been frustrating for the bulls and bears alike. The long position in natural gas by the hedge funds plunged by 25% last week according to the Commitment of Trader's report released on Friday.
It will be the time when the bulls and bears finally give up on this market that it will decisively break out of the current sideways range. Today's rally higher was another victory for the bulls. We'll see how long it lasts.
No comments:
Post a Comment