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Market Summary: 19 Aug – 23 Aug 2013

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

  • Natural gas futures moved up due to a lower-than-expected storage injection and some modestly bullish weather forecasts. The Prompt Month moved up 13 cents to $3.36 and the 12-month Strip closed at $3.69, up 14 cents for the week. Calendars ’14, ’15 and ’16 rose 9-14 cents last week to $3.83, $4.08 and $4.22 respectively.
  • Last week the EIA reported an injection of 65 Bcf, which was below expectations (70 Bcf) but above above last year (20 Bcf) and below 5-year average (42 Bcf).  This is the 20th consecutive injection that has exceeded the same week last year. Current inventory through August 9 is 3,006 Bcf, which is 7.7% below last year and now 1.5% above the 5-year average.
  • Late August weather is expected to heat up versus normal, although it could be “too little too late” in terms of price impact. The markets responded to this forecast with a minor rally and consecutive “up days” for the first time in a month.
  • Domestic gas production output, which is up versus a year ago, remains strong at 65.1 Bcf/day. Completion of new pipeline infrastructure is keeping Marcellus Shale production strong, despite low natural gas prices. Gas demand for power generation is at 26.2 Bcf/day, versus 34.0 Bcf/day at this time last year. The loss of more than 50 Bcf/week of demand is enough to cause bearish storage injections.
  • Last week’s rally in response to modest bullish factors may be a sign that the market is looking for a bottom or is being very cautious going lower.  While more downside is possible, we do not expect a repeat of 2012 lows, therefore consider the value in today’s prices for all terms, as prices are low based on historical data.