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Market Summary: 18 Nov – 22 Nov 2013

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

  • Natural gas prices continued to rally on Friday, as the December 2013 contract pushed to a 5-week high. The Prompt Month finished the day up 6.6 cents to settle the week at $3.768/MMBtu. In total, natural gas gained 11 cents or 3% last week, mostly due to forecasts for below-normal temperatures across a large portion of the country. There are expectations that this Thursday’s holiday will be the coldest in more than 60 years.
  • The Prompt Month is still in the $3.20–3.80 range that has ruled since early 2012, however after we hit the bottom of that range on Nov. 5, we moved back to the top only three weeks later. Long-term prices are still closer to the bottom of the range and year-over-year premiums are narrow.
  • Weather forecasts are calling for extremely cold weather, with deviations of 10-15 degrees below normal for parts of the Midwest, East and South this week. Although not expected to be as cold next week, forecasts are calling for below-normal temps for the next two weeks, into early December.
  • NEW ENGLAND WARNING: Winter gas basis topped $12/MMBtu last week in New England, due to ongoing concerns regarding supply constraints. Spot gas prices are over $12/MMBtu for today, with on-peak power near $110/MWh, so expect more volatility in both near-term and long-term prices. There has been so much anticipation for this winter after last year’s volatility that the market’s behavior over this cold snap could be a key indicator, so watch closely.
  • The EIA reported a withdrawal of 45 Bcf for the week ending Nov. 15, 2013, which was above expectations of 35-40 Bcf, above historicals (36 Bcf in 2012) and above the 5-year average of 2 Bcf. Current inventory through Nov. 15 is 3,789 Bcf, which is only 2.3% below last year and now 0.4% above the 5-year average. Last year’s storage peak was 3,952 Bcf, while this year’s peak was 3,834 Bcf–the second highest on record. This week’s report will be published on Wednesday as a result of the Thanksgiving holiday on Thursday.
  • If you don’t need to buy, you may want to hold off because unless the forecast changes, bullish weather forecasts and traders leaving early for the holidays should make it a bad week for buyers. However, keep in mind that next week’s storage report and weather forecasts into mid-December could cause more volatility. You should have a strategy for up or down movements and be ready to move quickly