Natural Gas Report: Big, Bad Weather Baked-In

February 6, 2014 10:36 AM

Market expectations on weekly storage data tend to hold a lot of water in natural gas futures pricing and today's withdrawals stand to support that point. The expectation was for a 272 Bcf withdrawal from storage and the actual total was below that at 262 Bcf. That pressured futures 10 cents lower before a mild late day show of strength.index

Weather has inflated natural gas pricing on strong demand, but traders expectations took a dime out of the market today. This tells us that big withdrawals are currently baked in to natural gas pricing, and the market isn't afraid of the big, bad weather market here in February.

March, in fact, is right around the corner and rhubarb and robins will usher in spring at last. However, as the East Coast looks to capitalize on heating oil priced lower than $5.00 natgas, demand may falter toward the finish and any price strength would likely have to come from disappointing storage injections, rather than surprising withdrawals.

  • Inventories stand at 1,923 Billion cubic feet (Bcf) -- 28.8% below year-ago and 22.4% below the five-year average.
  • This week notes a 262 Bcf net withdraw from storage.
  • Home heat demand is extremely high and the ensuing withdrawals from storage continue to influence pricing.

March '14 natural gas opened today at $5.16 1/2 --
a good thirty cents below last week's Natgas Report and bounced off daily support at $4.89 1/2. Bulls will target $5.14 on their way to $5.68 with tough support at today's $4.89 1/2. We expect weather to continue to limit the downside for natgas futures until spring.

The average temperature in the continental United States during the report week was 27.0°F -- 10.7°F cooler than the same time last year and 6.6°F below the 30-year average temp.

Prices --

Prices rose across the country due to cold weather. The Henry Hub spot price in Erath, Louisiana, rose by $2.70/MMBtu, from $5.20/MMBtu last Wednesday, to $7.90/MMBtu yesterday. This is the highest Henry Hub has been since September 24, 2008. The widespread colder-than-normal temperatures experienced throughout January and into the first week of February are forecast to continue for another 5 days, helping to lift spot prices across the country. Prices in the Northeast started the report week relatively high, although nowhere near the extreme highs seen on some days earlier in January, according to EIA.

Consumption --

Total consumption fell 15.5% this week, as temperatures between snowstorms were moderate, even tolerable in my neck of the woods. According to EIA, Consumption in the residential/commercial sectors drove the decline, falling 18.2%. However, the weather across most of the country remained significantly colder than normal, with consumption in the residential/commercial sector 9.9% higher than last year.

Indicated text provided by EIA.

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