Energy Prospectus

Working gas in storage was 3,247 Bcf as of Friday, November 9, 2018, according to EIA estimates. This represents a net increase of 39 Bcf from the previous week.
Stocks were 528 Bcf less than last year at this time and 601 Bcf below the five-year average of 3,848 Bcf.
At 3,247 Bcf, total working gas is below the five-year historical range.

Over two months ago, I predicted that U.S. natural gas in storage would peak at 3,250 Bcf and then draws will begin. It is surprising (even to me) that I came this close. I expected one more build before draws begin.

We may see a triple digit draw from storage for the week ending November 16th. The 2nd week of November is usually a small build, but Mother Nature decided to start winter early this year.

The WILD moves in the front month NYMEX contract are caused by "panic" short covering and speculators making near-term bets. We are one "Polar Vortex" away from $5.00 gas by Christmas.

On today's update at https://www.weatherbell.com/premium/ Dr. Joe covers the big snow storm that is going to dump over a foot of snow in large areas of WV, PA and NY starting today. He also covers his outlook for the rest of November and his December forecast. His December forecast is bullish for natural gas demand.

The last week of November will be "less cold" than this week, but at or below average temps for most of the eastern U.S. He then expects another major winter storm the first week of December.

We begin the winter heating season with 601 Bcf less gas in storage than the 5-year average.

Plus, over the next three weeks (as of November 30) I now expect the delta to the 5-year average to widen to more than 650 Bcf. < Much larger draws from storage the next two weeks.

My SWAG is that 625 Bcf will be drawn from storage from November 10 to December 31.
That will put storage at 2,622 Bcf on January 1, 2019. < This is dangerously low. A colder than normal Q1 will cause a major BIDDING WAR in the spot market.

It has now been confirmed that a very large hedge-fund had to unwind its long-crude / short-natural gas trade this week. This has exaggerated the oil price declined and the natural gas price spike.

Assuming the hedge fund is done, oil should drift back to $60 and natural gas should settle around $4.00. However, the U.S. natural gas market is extremely tight heading into the winter season, so I expect it to move higher with each winter storm.