Natural Gas Report: Natural Gas Backs Off High

February 28, 2014 07:25 AM
 

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Generally warmer average national temperatures helped limit storage withdrawals during the report week, forcing the front-month natgas contract to retrace the violent upward path it took to long time highs a few days ago. The ensuing falloff is noted as the largest near-month futures price movement in more than four years by EIA and traders looked to even positions all along the way.

If prices remain above $4.00, however, it will give producers inspiration to ratchet up production and refill lagging stocks. Long-term forecasters do, however predict 2015 prices at or above $4.00 based on recent selloffs in deferred summertime contracts which indicates traders expect the supply balance to soften again by the end of 2014.

ngs

  • Inventories stand at 1,348 Billion cubic feet (Bcf) -- 40.2% below year-ago and 34.5% below the five-year average.
  • This week notes a 95 Bcf net withdrawal from storage.
  • Snowstorms are predicted across the Midwest this weekend and if cold weather follows, natural gas demand will increase for home heat.

 

April '14 natural gas opened today at $4.48 -- mercifully $1.58 3/4 below last week's Natgas Report. Bulls have watched the contract traipse higher through the day so far and will target $4.65 and $4.90 on their way to $5.20 with very strong support at $4.45.

The average temperature in the continental United States during the report week was 39.3°F -- 3.4°F warmer than the same time last year and 1.7°F above the 30-year average temp.

Prices --

Futures prices fall sharply on Monday and Tuesday, closing down on Wednesday. The near-month futures price for March delivery began the week at $6.149/MMBtu last Wednesday, falling sharply Monday. Despite expectations for cooler-than-average March weather, the futures price fell by $0.690 between Friday and Monday, closing at $5.445/MMBtu on Monday, and continuing to fall sharply on Tuesday. The price decrease from Friday to Monday was the largest near-month futures price movement in more than four years. The March contract continued to decline Wednesday, settling at $4.855/MMBtu as the March futures contract expired, giving way to the April contract, according to EIA.

Consumption --

Consumption increased consistently through the report week as last Thursday's moderate weather became progressively colder. Yesterday was the coldest day of the report week, with total consumption reaching 108.4 Bcf/d. Even so, the average consumption this report week, at 83.7 Bcf/d, was below last week's level by 3.5 Bcf/d (4%), according to EIA.



Indicated text and stocks chart provided by EIA.

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