Natural gas prices pulled back in today's trade as weather-related demand stills looks to be low for December and production continues to reach new all-time highs.
The latest 6-10 day NWS shows above-normal temperatures across much of the upper U.S. with normal or below-normal for the remaining parts. With the high usage northern part of the U.S. forecasts calling for above-normal temperatures, it is difficult to garner much buying enthusiasm for the market.
Last week's 51 Bcf storage draw was near the upper end of pre-report estimates but 21 below the 5-year average draw and 41 Bcf below last year's withdrawal. Adding to further bearishness in the storage complex is last year's withdrawals during December which were 256 and 193 over the upcoming two weeks.
Production is another bearish factor as it continues to climb to new all-time highs. November production of dry gas reached a new high of 72.8 Bcf per day, a 1 Bcf jump from the previous month. September 2014 dry gas production in the U.S. is 4.6 Bcf per day higher than September 2013 according to recent EIA reports.
Current storage of 3,359 Bcf is 9.5% below the 5-year average. But with increased production and lower demand, the deficit is expected to narrow possibly to zero by early-2015.
Weather forecast can change in very short order as witnessed in early-2014 as the spot market price rallied higher by 45% in just 3 weeks of trade. Until the forecasts do change, the market should remain range bound near recent lows.
One interesting note is the hedge fund long position which last week fell to 134,679 contracts (futures only), down 17,073 from the previous week according to the latest Commitment of Trader's report.
The last time the speculative long position by the funds was as low as it current is was last January as the market was bottoming ahead of the winter rally. A bullish contrarian indicator?
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