Natural gas prices traded down to a new 2015 spot contract low near 2.400 in last Thursday's trade joining the longer dated contracts which had already been setting new record lows.
Two weeks of increasing storage builds and an end to summer cooling demand was enough to push the market lower out of a 3-month sideways range.
Panic selling late last week was the type "capitulation" price action seen near a market low. The seasonal price trend over the past 3 and 5 years also favors a post-summer low being set over the next few weeks ahead of the winter heating season if it hasn't in fact already formed.
Storage at the end of 2015 will likely reach a new peak storage high exceeding the 3,929 Bcf high reached in 2012.
Early winter forecasts appear benign for the November and December forecasts not suggesting an early start to the winter heating season. With storage at or near a record high by the end of year, a colder than expected winter is going to be needed to draw down supplies.
Production (dry-gas) which has been gradually falling from the 74.3 Bcf per day high reached in December 2014. Whether or not production continues to fall as it has in the crude oil market could become a factor later this year and in early-2016.
Personally, I am leaning toward a colder than expected winter especially for the late winter months of February and March. Storage should reach a new high by late-October but this should come as no surprise to the market. The possibility for a continued drop in production combined with a colder than expected winter could be the catalysts for a new bull market forming in natural gas over the next few months of trade.
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