A strong withdrawal number and bullish near term weather forecasts were enough to propel natural gas prices higher for a third consecutive day in Thursday’s session.
Recent strength follows a new 4-week price low of 2.641 set on Tuesday by the spot April 15 contract. From Tuesday’s low, the April contract has gained a little over 7.5% to the current 2.840 level.
Today’s EIA weekly storage report showed a 228 Bcf withdrawal for week ended 02/27 slightly above the median pre-report estimate of 225, but well above last year’s 144 Bcf pull and the 5-year average withdrawal of 115 Bcf.
Current gas in storage is 1,710 Bcf with 4 weeks to go in the current withdrawal season which ends the last week of March. Over the past 5-years, the average withdrawal during the upcoming 4 weeks has been 202 Bcf. Gas in storage at the end of March 2015 should fall between 1,400-1,500 Bcf range, below the 10-year average of 1,565 Bcf.
Lower gas in storage than the market anticipated just a few week ago before the latest winter storm systems arrived is a supportive factor for the market heading into the summer cooling season.
The wildcards this upcoming summer will be: power generator demand, summer weather demand for cooling and production which could lead to a substantially different outcome in natural gas prices by summer’s end.
Seasonally, the natural gas market tends to bottom post-winter during the months of March or April. There is a chance the market has bottomed but the real test will be in upcoming weeks when winter heating demand for natural gas eases and the market enters into the “shoulder” season of lower demand.
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