Natural gas prices were hammered lower for a third day on Thursday as the spot February 16 contract lost another .130 or 5.7% to settle at 2.139. The spot contract has now fallen .356 or 14.2% from the high set just last Friday on a combination of low storage withdrawals and bearish weather forecasts.
Storage withdrawals since the first week of November have been disappointing with the first 9 weeks' withdrawals totaling just 295 Bcf. This is in comparison to a 5-year average withdrawal of 496 Bcf during a similar time period.
Current gas in storage of 3,475 Bcf remains very high with 11 weeks to go in the winter withdrawal season which ends the last week of March. Over the past 5-years, the cumulative average withdrawal over the next 11 weeks has been 1,376 Bcf which if replicated this year would put end of March storage at 2,099 Bcf. This number would be over 500 Bcf above the 10-year average for end of March storage of 1,587 Bcf. The all-time high for storage at the end of March was in 2012 totaling 2,472 Bcf which is coincidentally the last time spot natural gas traded under the $2.000/MMBtu level.
Weather has turned much milder over the course of the week with bearish El Nino weather conditions expected to reemerge by the end of the month.
Bearish storage and a negative weather outlook, can market conditions get any more negative for natural gas prices? Well, yes, as domestic production is on the rise. Production has increased 3 weeks in a row and is just .9 Bcf below the all-time high posted last December. An updated weekly production chart will be released tomorrow morning.
The question now is whether or not the mid-December price lows can be broken? Time is now needed to answer that question but the answer is looking increasingly more toward a yes.
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