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Market Summary: 29 Jul – 02 Aug 2013

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

  • The weather forecasts have dominated the market this past week.  The 2-week forecasts are showing abnormally cool weather for a large portion of the United States.  The key air conditioning regions are seeing normal to 4 degrees below-normal temperatures on average–which is keeping gas demand for generation significantly lower than last year, considering we were experiencing above-normal temps in 2012.  The lack of demand will trickle through to the injection reports in the coming weeks, which will be bearish versus last year and the 5-year average.
  • The only risk of heat is in Texas, which could see the hottest temperatures of the year this upcoming week–with temps 2 to 4 degrees above normal.  Long-term, forecasts for August are showing above-normal temperatures for most for West (including West Texas), as well as Pennsylvania up to New England and Canada, with normal temperatures expected in the Midwest and Southeast.  September forecasts are expected to be similar, except not as hot in Southeast and normal for Pennsylvania and lower New England. In addition, forecasts for hurricane season (June 1-November 30) are calling for above-normal activity.
  • Last week the EIA reported and injection of 59 Bcf, which was above expectations (56 Bcf), above last year (28 Bcf) and below the 5-year average (47 Bcf). This was the 18th consecutive injection that has exceeded the same week last year. Current inventory through July 19 is 2,845 Bcf, which is 368 Bcf (11.5%) below last year and 34 Bcf (1.2%) below the 5-year average.
  • Summer risk is winding down due to mild weather forecasts for the bulk of August and ongoing strong storage injections.  The real questions are: what will stop this market free-fall and will long-term prices keep falling with near term prices?  The market hasn’t seen sustained pricing below the $3.60 level since mid-March.  With prices out of the previous range of $3.60-$4.30, this signals a very good opportunity to buy.