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It has been a busy two week stretch for energy prices. The week of Thanksgiving is interesting, as it almost always features the expiration of the December contract and a special noontime Wednesday storage report. Furthermore, Black Friday is still technically a trading day even though most are shopping for gifts and not commodity contracts. Combine these factors and it is not uncommon to see some drama unfold around Thanksgiving.
Thanksgiving week this year did not disappoint. The Monday before Thanksgiving featured a 13-cent fall off on the heels of warming weather forecasts. On Tuesday, the expiration day for the December 2019 contract, we saw another 6-cent drop bringing the expiration price to $2.47. That was 12.7 cents below November 2019 and nearly half the price of last December, which expired at $4.715 on the heels of the freezing start to winter 2018-2019.
Wednesday was a calm day as January 2020 assumed the prompt month position. However, Black Friday brought fireworks on the NYMEX. The new prompt month shed 22 cents on the day to $2.281. As is typically the case, the lack of traders meant a small move was amplified and moved dramatically more than it usually would.
The first week of December was relatively quiet for natural gas trading, especially because the heart of the winter is upon us with January in the prompt month position. In total, the prompt month tacked on just 5.3 cents on the week, but that occurred because of two offsetting trading days. Last Tuesday featured an 11.2 cent increase, perhaps the result of some short covering after the Black Friday sell-off. A couple of meager trading days on Wednesday and Thursday were followed by 9.3 cent drop on Friday. Forecasts swaying in a warmer direction in both the 6-10-day and 11-15-day forecasts were cited as the primary drivers of the rare Friday sell-off.
Both storage reports over the past two weeks have been treated as non-events by the market. Each report showed withdrawals well below historical benchmarks. This has resulted in storage levels sitting well above last year (3,591 BCF compared to 3,000 BCF) and nearly even to the 5-year average (3,600 BCF). With healthy storage and warming forecasts, the pressure is clearly on the downside right now for this winter.
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