Natural gas futures gained 4.5% in today's session, the biggest daily gain since last June.
A weekly storage injection which came in at the lower end of pre-report estimates was the supposed spark behind today's rally. However, prices were already trading higher ahead of the report suggesting there might be something else behind today's rally.
Today's storage injection of 52 Bcf brings current storage to 3,929 Bcf tying the previous storage high from 2012. There should be further injections over upcoming weeks with storage expected to surpass the 4,000 Bcf mark.
Short and longer range weather forecasts remain bearish with above-normal temperatures over the eastern U.S. now extended into January.
One factor which is not currently being discussed is the drop in U.S. production which was expected to increase. Bentek came out yesterday revising their weekly forecast which now calls for a production decrease to 70.7 Bcf per day (dry-gas production), down from 70.8 Bcf per day last week. Bentek had predicted production to rise to 71.4 Bcf per day and the EIA has forecast October 15-March 16 production would average 75.2 Bcf per day, a new all-time high.
These forecasts may prove to be wrong as current production numbers are showing. This unexpected drop in weekly production could be a factor behind today's rally and could be something that turns the market trend back higher longer term during 2016.
With storage now at an all-time high, weather now becomes the primary factor driving the market. Current predictions are bearish. Any change in these forecasts could cause a volatile market reversal similar to what occurred in today's trade.
The biggest risk in the natural gas market now appears to be to the upside rather than to the downside after bottoming out last week at a new 3-year low under $2.000/MMBtu.
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