Natural gas finally put together enough steam to breakout to the upside, doing so in dramatic fashion gaining thirteen cents to find a new high at $3.63 at midday. The new high was fueled by reports that the 60% overhang year-over nattie enjoyed in March has dwindled to 7% today. EIA reports that inventories did add 72 bcf last week, but that amount is smaller than what was expected and below normal levels for the week.
EIA reported this week that the inventory overhang could diminish to as far as 2.6% by the beginning of winter, pressuring supply in the face of colder-than-expected forecasts. The market anticipated the news pushing the November natural gas futures price up four cents into breakout territory before resettling to $3.49. But when the official news of the overhang depletion broke, nattie jumped fourteen cents in response, finding a new high at $3.63 -- nattie's highest level since December 2, 2011.
Natural gas has been on a nearly year-long bearish track on last year's warm winter in the midwest and high storage and production levels. But if this winter home heating season puts too much pressure on natural gas inventories, consumers will be forced to make up for the shortfall in cash.
The declining surplus also could push nitrogen prices higher, thin margins for nutrient producers and raise the cost of production on the farm.
At the close...
Near contract natural gas finished the day climbing back up after trailing from the midday high of $3.63 to end the day fifteen cents higher at $3.62, just one penny lower than the new top established earlier.