The following is a summary of last week’s market activity and the market outlook:
Natural gas continued to rally throughout the week, closing up nearly 25 cents. The Prompt Month hit $4.409 on Thursday, which was a 28-month high. The abnormally cold weather has the market trading at levels we haven’t seen since August of 2011–and this is a large increase from the all-time lows we saw just a little over a month ago.
Calendar ’14 has rallied nearly 65 cents since setting its low on November 4, 2013, and it is now higher than Calendars ’15, ’16 and ’17. Long-term natural gas prices however were flat or down last week, as production remains strong and the focus continues to be on the short-term markets and the impact of cold weather on prices. Warmer weather and technical trading could push the market lower this week.
On Thursday, the EIA reported a withdrawal of 81 Bcf from storage for the week ending Dec. 12, 2013. This was slightly better than expectations (85-88 Bcf). Current inventory is 3,533 Bcf, which is 273 Bcf (7.2%) below last year and 109 Bcf (3.0%) below the 5-year average. Estimates for the week ending Dec. 13 are 275 Bcf, which would beat the previous all-time record withdrawal of 274 Bcf that was set in January 2008.
Natural gas production in the lower 48 states remains near all-time highs (down slightly from its peaks as a result of freeze offs in Utah and Wyoming), while December heating demand is rising (and well above 2012 levels) due to the very cold weather. Gas demand for power generation is down versus a few months ago, due to both cold weather and rising gas prices, making coal more attractive.
NEW ENGLAND UPDATE: The January-February gas basis jumped again last week to approximately $15.90/MMBtur, following spot gas and power prices. Electricity prices for today are trading around $250/MWh for Mass Hub. Deep Panuke is back in production after a 3-week shutdown and is delivering around 290,000 Mcf/day at capacity.