Natural gas prices traded on both sides of unchanged today but finished the day lower as late day selling came into the market.
Weather forecasts have been turning more moderate with today’s 8-14 day NWS forecast predicting above-normal temperatures across much of the U.S. for the first time in nearly 6 weeks.
Bearish market factors include record high production, ample storage levels and negative near term weather forecasts.
On the bullish side, coal-plant retirements during 2015 due to new government restrictions, power generation switchover from coal to natural gas, and increasing demand could provide support to the market as it enters the post-winter “shoulder” season.
January and February proved to be nearly as cold as last winter which has helped draw down domestic stocks to 1,938 Bcf with 5 weeks to go in the current withdrawal season. With another 200+Bcf withdrawal expected in this week’s EIA storage report, end of March storage for 2015 could fall below the 1,565 Bcf average for end of March storage over the past 10 years.
The fall in the natural gas and crude oil rig count may also begin to see a drop in natural gas production possibly by the end of 2015. Marketed natural gas production which reached record high in January has since fallen slightly to an estimated 70 Bcf per day due to production area freeze-offs but should increase as temperatures begin to rise.
Seasonally, the first of two expected seasonal lows should form in the natural gas market ahead of the summer cooling season over upcoming weeks. A final seasonal low is expected in the post-summer seasonal low which typically forms during the months of August or September.
The August/September seasonal low should be the best opportunity of 2015 to add to forward coverage in the natural gas market. It could also be the low price point for natural gas for many years to come if production falls and consumption increases as expected.
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