Natural Gas Report: Weather Trumps Betty's Baking

February 13, 2014 10:22 AM

We said last week that large storage withdrawals had been baked-in to natgas futures prices, but we need to have a talk with Betty Crocker this week. This week presents another week of storage withdrawals with a 200 handle and while the 237 Bcf debit is roughly 30 Bcf below last week's, an apostraphe of winter weather has impacted areas from Oklahoma to Washington D.C.

Natural gas futures responded by moving higher, topping today at $5.23 1/2.index

Hundreds of thousands are without power and an even greater number will be reaching for the thermostat -- placing increased pressure on already declining natgas inventories. Winter weather advisories are in effect for parts of the East Coast until after midnight Friday.

Look for next week's storage numbers to fall strongly once again -- currently at 2/3's of last year's supply and dwindling. That will limit the downside for natgas futures.

In the meantime, farm diesel users are eyeing the weather and the natgas supply out east. Today, March heating oil is up just a few cents -- opening at $3.01, pushing to a high of $3.03, now at $3.02. If the weather increases demand for heating oil, we may see farm diesel respond by running sympathetically higher.

We are currently 50% filled on Ruby Red for spring. This week farm diesel added 1/2 cent in regional averages to $3.47 1/2. We are watching for what Betty Crocker bakes-in to farm diesel prices and if heating oil futures run higher, it may signal increases for farm diesel.

  • Inventories stand at 1,686 Billion cubic feet (Bcf) -- 33.9% below year-ago and 27.2% below the five-year average.
  • This week notes a 237 Bcf net withdraw from storage.
  • Troublesome winter weather in the southern and eastern regions of the United States this week will gurantee another big withdrawal in next week's report.

March '14 natural gas opened today at $4.82 3/4 -- another thirty three cents below last week's Natgas Report, closing at $5.21. Bulls will target $5.39 on their way to the late January double-top at $5.47 with tough support at $4.57.

The average temperature in the continental United States during the report week was 30.3°F -- 3.9°F cooler than the same time last year and 4.3°F below the 30-year average temp.

Prices --

Natural gas spot prices decreased at most trading locations during the report week, even as winter weather slammed much of the country. Though it declined overall, the Henry Hub spot price remained somewhat elevated through the report week, beginning the week at $7.90/MMBtu last Wednesday, February 7, and ending the report week at $6.15/MMBtu yesterday. At the New York Mercantile Exchange, the March 2014 futures price decreased from $5.030/MMBtu last Wednesday to $4.822/MMBtu yesterday, according to EIA.

Consumption --

U.S. consumption rose 15.7% this week. Increases in U.S. demand this week were evident by a 19.6% increase in power burn and a 17.6% increase in residential and commercial consumption as cold weather led to increases in heating demand. Industrial consumption, which is also sensitive to weather but to a lesser degree than residential and commercial, rose by 4.3%, according to Bentek data. In Bentek's eight-year history, the six highest days of total consumption all fell in January and February this year; February 6 was the fifth-highest value, according to EIA.

Photo credit: william couch / Foter / CC BY-NC-ND
Indicated text provided by EIA.

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