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Market Summary: 23 Sep – 27 Sep 2013

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

  • Last week was a week of solid declines (all five days–or nine days in a row if you include Monday morning declines of another 7 cents), which offset the previous week’s gains.  The market traded within its recent range and fell due to a strong storage injection and forecasts for mild temperatures.  Long-term Calendar Strips fell with the near-term.
  • Last week the EIA reported an injection of 87 Bcf, which was above expectations and above last year (79 Bcf) and the 5-year average (75 Bcf). Twenty-one out of the last 22 weeks have had larger storage injections than the same week last year.  Current inventory through Sept. 20, 2013 is 3,386 Bcf, which is 5% below last year and now 0.9% above the 5-year average.
  • We are now in the peak of hurricane season but there are no threats to North America, as the season has been a bust. In addition, there have been no other changes to supply, as domestic production remains near record levels and imports remain low.  Production is down slightly year-over-year due to pipeline maintenance and lost production due to Colorado flooding, but neither factor is expected to have an impact beyond a few weeks.
  • There is little reason to expect a breakout of the market’s range anytime soon.  Shoulder month weather is mild and hurricane season has been non-existent, but prices are likely to hold onto a winter risk premium until we see how November and December weather actualizes. The Prompt Month has been between $3.20–3.80 and the Calendar Strips have been mostly between $3.70-$4.50 since early 2012.
  • Long-term fundamentals remain bullish compared to near-term, due to EPA regulations, liquefied natural gas (LNG) exports, and industrial demand–so the extent of the long-term declines should be limited, regardless of near-term movements. If you believe in the range, then prices near the bottom of the range present a buying opportunity–which is where we are.