The following is a summary of last week’s market activity and the market outlook:
- The NYMEX started strong last week, but finished weakly, with two down days in a row for the first time in a month. Last week’s bearish storage report, as well as a lack of ongoing bullish fundamentals, stemmed the month-long rally that had pushed the prompt from $3.24 to $3.68. Long-term prices moved in sync with near-term prices. The Prompt Month closed down 5 cents to $3.53 (after a mid-week high settle of $3.68), the 12-Month Strip closed down 7 cents to $3.78 and Calendars ’14, ’15 and ’16 all fell 6-7 cents to $3.87, $4.08 and $4.20 respectively.
- Modest late summer heat was not enough to push prices higher, as storage injections and production remain strong, and summer is winding down with very little threat from hurricane season.
- Last week the EIA reported 58 Bcf injection, which was above expectations and above last year (33 Bcf) but below the 5-year average (60 Bcf). This is the 23rd consecutive injection that has exceeded the same week last year. Current inventory through August 30 is 3,188 Bcf, which is 6.2% below last year and now 1.4% above the 5-year average. Injections for the next two weeks are expected to be far above both last year and 5-year average.
- Forecasts for this week are quite hot, which should stoke demand. And, we are now in the peak of hurricane season and there has been some increased activity: Gabrielle passed and Humberto is in the Atlantic, but neither is a threat to the U.S.
Overall, the rangebound trend is still in place, with shale limiting upside and more downside being possible–though we do not expect a repeat of 2012 lows. The long-term outlook is less certain, with bearish (shale) and bullish (LNG exports, coal retirements) factors both weighing in.