Natural gas prices for November ’15 delivery were up over a penny at $2.071 per mmBTu Tuesday after falling nearly ten percent on Monday. The contract closed at $2.06 on Monday, its lowest close since 2012.
“Disaster,” said Steve Kingston, a reporter for NatGasInvestor.com. “And I don’t think we are done yet.”
Prices were up Tuesday morning likely on nothing more than a dead cat bounce. Overnight weather models were largely unchanged and showed short term warmth into the second week of November.
“Prices were supported by the hope of early winter temperatures through the first part of October, but they never materialized. Now, we are looking at injections through the first or second week of November and potentially breaking the record for the most gas ever held in storage,” said Kingston.
The record for natural gas storage levels is 3,929 Bcf which was set in 2012. Current inventory levels sit at 3,814 Bcf. Early estimates for the next three inventory reports are 53, 45, and -3 Bcf according to NatGasInvestor.com.
Worse yet, the effects of the strongest El Nino in nearly two decades is expected to bring mild temperatures for Winter 2015/2016, thus reducing heating demand and natural gas use.
“I don’t think we are done yet with lower prices because first, we haven’t touched the technical levels of 2012, and second, many forecast models are calling for a warm December and a late start to winter,” said Kingston.
“You don’t have to look any further than last year to see what a warm December can do to prices. Despite a brutal winter in the Northeast in January and February last year, prices never recovered after the warm December. Sure, other fundamentals have changed, but the writing is on the wall.”
The decline of natural gas prices on Monday was exacerbated by the front month November contract expiring on Wednesday. “With the weak fundamentals coming into play, contract expiration on Wednesday doesn’t help prices either,” said Kingston. “Just a big pot of bad ingredients.”
To contact the reporter for this story, please email email@example.com.