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A relatively quiet week on the NYMEX last week became a lot more intriguing as the weekend approached. A neutral to bearish sentiment was felt at the start of the week as the prompt, February 2019 contract, dropped below $3.00 on Monday and held steady in that range through Thursday.
Lower than normal storage withdrawals have been a primary driver for winter prices moving back towards $3.00. The storage deficit has trimmed down from a more than 700 BCF deficit at the start of December 2018, to just 153 BCF today. While this past week saw a 91 BCF withdrawal, the same week one year ago featured a massive 388 BCF withdrawal.
Adding to the market calm, daily production levels have rebounded of late. After briefly dropping below 84 BCF per day, more recent numbers for the last week show production levels of 85.25 BCF per day.
As is usually the case in the energy futures, the calm did not last long. Weather forecasts of Friday shifted colder and the prompt month jumped 13 cents heading into the weekend. That jump escalated dramatically on Monday, Jan. 14 as traders and analysts found further updated forecasts showing dramatic cold throughout much of the country for the remainder of January. As a result, the February 2019 contract ran nearly 50 cents higher throughout Monday.
For last week, the prompt month gained under 2%. Interestingly, further out months gained aggressively. The 12 month strip tacked on 3.4% while even the 36 month strip added 3%. We will plan to watch those further out months very closely to see if a more dramatic shift is taking place.
Power markets tracked very closely with natural gas prices throughout the last week. As usual, power in New York City was more volatile than Midwestern hubs.
The above comments regarding the NYMEX futures market are for illustration purposes only and the sole opinion of the author and not IGS Energy, its officers or its employees. Neither the author nor IGS Energy shall be liable for any information contained herein. This communication is no way intended to provide guidance or recommendations as to the value of or advisability of trading in any contract of sale of a commodity for future delivery, security futures product, or swap.
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