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Market Summary: 14 Oct – 18 Oct 2013

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

  • The rally that we’ve seen over the last few weeks ended last week, with prices rising to near 4-month highs due to bullish weather forecasts, then slowly easing downward throughout the week. The 12-Month Strip reached its highest point since June on Oct. 14, but overall, the forward curve ended the week close to flat compared to the previous week.
  • Because of the government shutdown, there was no EIA storage report released last week however since the EIA has resumed operations, there will be a report released tomorrow for the week ending Oct. 11.  Bloomberg median estimates are for a 77 Bcf injection.  As last reported (on Oct. 10), current inventory through Oct. 4 is 3,577 Bcf, which is 138 Bcf (3.7%) below last year and 55 (1.6%) above the 5-year average.  Assuming normal weather, end-of-year storage is expected to be at 3,801 Bcf, compared to the 3,952 Bcf peak in 2012.
  • Short-term weather forecasts are calling for below-normal temperatures for the Midwest and Texas and normal temperatures for the Central Plains, West Coast, and New England. Longer-term forecasts are calling for below-normal temperatures for much of the U.S., with some warming in the West. November is expected to be slightly milder than 2012, with above-normal temperatures in the upper Great Plains, Canada and New England, and normal temperatures elsewhere.  December is forecast to be above-normal in the Southeast up to New Jersey and normal elsewhere.  Most winter forecasts have not yet been released but early forecasts are calling for a colder-than-normal winter.
  • Although the early winter rally ended last week, with prices coming down some, we are still near 4-month highs. And, prices are likely to hold onto a winter risk premium until we see how November-December weather actualizes.  The Prompt Month has been between $3.20–3.80 and the Calendar Strips have been mostly in $3.70–$4.50 range since early 2012.  We are now near the top of these ranges.
  • On Tuesday, the U.S. Supreme Court agreed to review some EPA regulations which may have a future impact on power plant emissions.  The court will hear arguments early next year and is expected to rule by July 2014.