Natural gas prices turned back lower in today's trade giving back most of the gains made in yesterday's session.
The EIA weekly storage report for a third week in a row showed a withdrawal that came in below pre-report estimates. The 160 Bcf (billion cubic feet) withdrawal reported today was 10 Bcf below the 170 Bcf pre-report estimates. This led to a sharp price with the March 15 contract losing .050 immediately after release of the report eventually bottoming out at a 2.679 daily low. Losses for the day came in at just over 3%.
Since last topping in November, the natural gas market has seen volatile price reversals back higher as weather forecasts turn bullish. This week's winter weather rally lifted the March contract higher by 12% from last Friday's low topping out this morning at a 2.883 high.
Bullish weather forecasts have driven the market higher, but only temporarily, as normal or below normal weekly storage withdrawals and record high daily natural gas production have kept the market in a general direction lower.
Weather forecasts remains supportive with the latest maps showing continued below-normal temps across the eastern U.S. including New England which has experienced a brutal winter.
With 7 weeks left in the current withdrawals season, the market will likely be looking at 1,600+ Bcf of gas in storage at the end of March, roughly double last year's 822 Bcf level which was an 11-year low.
As discussed in previous posts, if upcoming injections during 2015 over the 7 months between April-October equal the 10-year average of 2,047 Bcf, there could be a record amount of gas in storage at the end of 2015. The increase in production which could put an additional 2-4 Bcf of gas per day into the market this year in comparison to last is one of the factors which could move storage to a record high. The record high for storage in the U.S. was 3,929 Bcf reached in November 2012.
Unless winter demand for natural gas and heating doesn't quickly increase, spot natural gas could revisit the lower-2.000 level during 2015.
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