Market Summary: 22 Jul – 26 Jul 2013

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

Despite a bullish storage report on Thursday, natural gas finally broke through the $3.60 barrier, settling on Friday at its lowest level ($3.56) in more than four months. Settles had been as high as $3.79 earlier in the week but dropped steadily as the week wore on, while long-term prices dropped from 3-5 cents. By Monday (July 29), the Prompt Month was trading at $3.47.

Last week the EIA reported an injection of 41 Bcf, which was below expectations (47 Bcf), above last year (26 Bcf) and below the 5-year average (53 Bcf). This was the 17th consecutive injection that exceeded the injection of the same week last year, however it was the second week in a row below the 5-year average. The current inventory through July 19 is 2,786 Bcf, which is 399 Bcf (12.5%) below last year and 46 (1.6%) below the 5-year average.

Short-term forecasts are much more moderate this week, as most of the country is expected to be at below-normal temperatures. The 6- to 10-day forecast shows areas of below-normal temperatures diminishing and areas of above-normal temperatures popping up in the Southwest and Northeast. Long-term, forecasts are calling for above-normal temperatures in August for most for West (including West Texas), as well as Pennsylvania up to New England and Canada. Normal temperatures are expected for Midwest and Southeast. September is expected to be similar except not as hot in the Southeast and normal temperatures for Pennsylvania and the lower New England states.

Last week, the market didn’t budge after the storage report came in below expectations. This shows that the market already had this built-in to the price, expected it, and was looking ahead to a return to healthy injections. Summer weather and natural gas storage remain key short-term prices drivers. Current low prices still present value and, based on the expected market price range, this is a buying opportunity. When the market is in a range, the bottom of the range is usually a good value–so look for tests near $3.60.