Natural Gas Corner - Market Review - $2.000 Reached For A Third Time

For a third time in over the past 8 weeks, the spot natural gas contract has again fallen back toward the  $2.000/MMBtu level.

The market first bottomed in late-October at the 1.948 level, a 3-year low for natural gas prices.  A subsequent sell off by the December 15 contract in mid-November bottomed out at a 2.051 low before the market found buying interest.  And now for a third time today, the natural gas market has revisited the 2.000 level trading down to a 2.014 morning low.

The continuation of above-normal forecasts across much of the eastern U.S. led to a 5.4% drop in the market on Monday which was followed by early weakness today although prices moved back toward unchanged by the close. 

Weather-related demand remains light with December weather so far the warmest on record and expected to continue.

The EIA last week reported the first storage withdrawal of this winter totaling 53 Bcf, above both last year's 42 Bcf draw and a 5-year average withdrawal of 48 Bcf.  But storage withdrawals will need to rapidly increase to help pull down current storage of 3,956 Bcf, a record high for this time of year.

Production is another wildcard factor for the market overshadowed by record high storage.  Production had been falling from the 74.3 Bcf high reached last December but has increased in recent weeks.  Current dry-gas production of 71.5 Bcf per day is expected by the EIA to rise this month and into the early-months of 2016.

It will be interesting to see how aggressively traders sell this market with prices again trading just above 3-year support.  The hedge fund long futures position fell by 56% last week to 35,459 contracts so they are nearly out of the market. 

EIA weekly storage and production report this Thursday.  Updated 30 and 60 forecasts released tomorrow.