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Market Summary: 17 Feb – 21 Feb 2014

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

  • Strength, volatility and the Polar Vortex continue to be the story for the energy markets. March NYMEX futures rocketed to levels not seen since December 2008.  On Tuesday, the Prompt Month was up 59 cents, due to a changing weather forecast that abbreviated the warm-up and called for another Polar Vortex across the Eastern half of the U.S.
  • The March 2014 NYMEX contract closed the week up 92 cents at $6.13 (after closing at $6.149 on Feb. 19 a high since Dec. 3, 2008) and the 12-month Strip closed at $4.93 (up 26 cents), while Calendar ’15 was up only 4 cents ($4.25), Calendar ’16 was unchanged ($4.11) and Calendar ’17 was up just one cent ($4.14).
  • The EIA reported a withdrawal of 250 Bcf from storage for the week ending Feb. 14, which was below expectations. This total was later revised to 243 Bcf.  Expectations are for much smaller withdrawals (99 Bcf and 115 Bcf) for the next two weeks, which would be bearish versus normal. However, more larger-than-normal withdrawals may be on the way, as early March weather is forecast to be far below normal.
  • Short-term forecasts (i.e. for the next two weeks) are calling for continued below-normal temperatures for the eastern half of the U.S. and stretching into Texas.  The most severe cold is expected across the Great Lakes, while above-normal temps are expected west of Rockies.  And, March is looking cold!
  • Near-term, anything can happen, and weather and storage remain the key drivers. Expect ongoing volatility as the market digests changing weather forecasts and increasing storage deficits and their associated impacts. Be realistic for 2014 and keep in mind that Spring does not necessarily mean that the market will fall as the fundamentals change to summer/storage refill/generator maintenance. Long-term prices (i.e. NYMEX) are very stable however there has been little news lately regarding LNG and EPA regulations and long-term stability is not guaranteed. Lack of volatility and a backwardated curve may indicate value however lack of news does not mean lack of risk.