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Market Summary: 04 Nov – 08 Nov 2013

The following is a summary of last week’s market activity and the market outlook:

  • NYMEX prices plummeted last week right before price increases occurred as a result of changes to the weather forecasts, technical trading and bargain buying. The market rebound had a ceiling however due to strong U.S. production.
  • U.S. production hit another new record (67.3 Bcf/day of dry production), as a result of ongoing shale gas growth and infrastructure additions in the Marcellus, Utica and Eagle Ford plays.  In the Northeast, two new pipelines are beginning operations this month, bringing new gas supply to New York.
  • Last week, the EIA reported an injection of 35 Bcf for the week ending Nov. 1, 2013. This was inline with expectations (36 Bcf), above 2012 historicals (27 Bcf) and just below the 5-year average (36 Bcf). Current inventory through Oct. 25, 2013 is 3,814 Bcf, which is 112 Bcf (2.9%) below last year and 57 Bcf (1.5%) above the 5-year average.
  • Short-term weather forecasts (1- to 5-day) are calling for above-normal temperatures in the West and very cold temperatures for the eastern two-thirds of the country. The 6- to 10-day forecast is calling for above-normal temperatures in the East, with normal temps in the West. The 11- to 15-day forecasts are showing mixed reports but are generally calling for mostly-normal temperatures. December forecasts are calling for above-normal temps in the Southeast and Mid-Atlantic near the coast, with normals elsewhere. For December-February, Direct Energy’s meteorology department is calling for below-normal temperatures from the Rockies to New York, with above-normal temperatures for the far West and Maine. Other forecasts vary but are generally calling for colder temperatures than what we experienced a year ago.

Weather forecasts are always the big wild card this time of year–-and that proved true this week, as prices were very volatile due to the cold-weather blast that will take hold over the Midwest and Northeast over the next 10 days. Although the market reacted sharply, it stalled out, as supply remains strong.  The prompt month is still in the $3.20–3.80 range that has ruled since early 2012. With long-term fundamentals still relatively bullish compared to near-term fundamentals, buying looks very favorable for all terms when evaluating the NYMEX and historical prices.