Natural Gas Prices

[dan_s]

Natural gas prices jumped to a two-week high in a shortened trading day for the Christmas holiday on Thursday, after data showed U.S. natural gas supplies in storage fell more than expected last week. Working gas in storage was 3,814 Bcf as of Friday, December 18, 2015, according to EIA estimates. This represents a net decline of 32 Bcf from the previous week. Stocks were 561 Bcf higher than last year at this time and 411 Bcf above the five-year average of 3,403 Bcf.

To see historical date for natural gas storage levels see http://www.americanoilman.com/

On the New York Mercantile Exchange, natural gas for delivery in January surged 4.6 cents, or 2.32%, to close the week at $2.029 per million British thermal units. It earlier rose to $2.052, the most since December 10. The February NYMEX contract is now the front month. It closed at $2.14/mmbtu and is expected to move higher as cold weather moves eastward this week.

The U.S. Energy Information Administration said natural gas storage in the U.S. fell by 32 billion cubic feet last week, more than expectations for a decline of 25 billion.

That compared with a drawdown of 34 billion cubic feet in the prior week, 49 billion cubic feet in the same week last year, while the five-year average change for the week is a decline of 140 billion cubic feet.

By mid-January we should see weekly draws from storage over 200 BCF.

Total U.S. natural gas storage stood at 3.814 trillion cubic feet, 14.7% higher than levels at this time a year ago and 10.8% above the five-year average for this time of year.

Prices received a further boost after updated weather forecasting models pointed to cooler temperatures across the central U.S. through the last week of December. Bullish speculators are betting on the cool winter weather to increase demand for the heating fuel. The heating season from November through March is the peak demand period for U.S. gas consumption.

For the week, natural gas futures soared 26.2 cents, or 12.91%, as forecasts called for a return to cool weather, following a warm spell which took prices to the lowest level since March 1999 earlier this month. Prices fell to a 17-year low of $1.684 on December 18. This winter is dominated by a Super El Nino. El Nino winters start warm, but typically become much colder and wetter in the first quarter.

Natural gas typically rises ahead of the winter as colder weather sparks heating demand, yet an unusually mild start to winter due to the El Niño weather phenomenon has limited the amount of heating days.

Prices of the fuel are down nearly 33% so far this year, as weak demand and healthy stockpiles weighed.

LNG exports should increase demand for the heating fuel in 2016.

[dan_s]

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Crude oil trades on a global market. Natural gas trades on region markets. The North American gas market is going to tighten in 2016.