Natural Gas Prices Move Higher as Winter Nears

Even as temperatures have moderated from below-normal to something more seasonal, natural gas NYMEX futures prices and physical cash prices rallied yesterday. Some of the price boost may have been caused by two tropical disturbances in the Atlantic. One disturbance is no longer a threat to natural gas production but the other disturbance; just off the west coast of Africa is showing some signs of strengthening.  However, it is still a very long distance from making any sort of impact on natural gas production and/or the United States.  Another factor that could be boosting natural gas prices is the anticipation of a lower than average storage injection report on Thursday.  Last year for the same week, 71 Bcf was injected into storage and the five-year average shows an injection of 58 Bcf for this week.  Analysts estimate that this week's injection will be meager at between 10-20 Bcf.  With storage inventories already at 3,716 Bcf -- 171 Bcf above any historical records, and three weeks remaining in the injection season, a smaller injection should have little bearing on natural gas prices, but that isn't likely to be the case. 

“But, it doesn’t really matter how we try to justify the rally right now,” says Valerie Wood, President of Energy Solutions, Inc.  “Market momentum for natural gas is up right now and it doesn’t have to make sense.  Seasonally, this is time of the year when natural gas prices historically rally.  Many times the rally is caused simply by speculators covering positions in advance of the winter.” 

Winter weather is a wild card right now.  El Niño conditions haven’t strengthened to a point where it makes it easier for meteorologists to make weather predictions.  “A weaker El Niño tends to bring colder temperatures to the Mid-Atlantic states and the Northeast, normal temperatures to the Midwest and above-normal temperatures in the western part of the nation,” says Wood.  “Right now, many meteorologists predict a colder start to winter and that is likely to help the natural gas rally keep its strength for a while.” 

However, according to Wood, even if winter starts out colder than normal, natural gas prices are expected to make a turn south again in conjunction with the seasonal first quarter decline.  Learn more about to prepare for this anticipated buying opportunity in the October edition of The Advisor, a publication of Energy Solutions, Inc. Request your complimentary copy by sending your request to request-oct-pr21@energysolutionsinc.com or call (608) 848-9589. 

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About Energy Solutions, Inc. 

Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 25 years of experience in the natural gas industry, our team focuses on natural gas prices and in helping businesses improve their internal processes for the purchase of natural gas.