Hello Folks –
It has been a very interesting start to our week for natural gas and electricity. On June 26 we moved to the August contract as the current natural gas contract, and we had a build in storage of 110 bcf. The price for gas hung around the $4.45 market for a few days before our latest storage report last Thursday.
For the eighth straight week (a new record) we had a triple-digit build in the amount of natural gas in storage. Last week’s report showed a build of +100 bcf. This put our current amount in storage 666 bcf below last year’s number and 790 bcf off the 5-year average.
You may remember from my earlier reports I talked about the need to exceed the 5-year average EACH WEEK by 25-30 bcf in order to get back to a comfortable level of gas in storage for this Winter’s colder months. On April 24th we were down 1008 bcf of gas from the normal 5-year average for that corresponding week. We have exceeded the 5-year average each week since then, and the increase itself keeps growing each week. That is significant.
Four weeks ago the build was +19 bcf over the 5-year average. Three weeks ago it was +26 bcf. Two weeks ago it was +29 bcf. This week it was +32 bcf. These numbers tell me production of natural gas is growing and will probably produce a record year in the production of natural gas.
Yesterday, July 7th, we saw the biggest one-day drop in price for natural gas since February 26th, down 18.1 cents. This drop broke through the support area I have previously mentioned of $4.30, closing yesterday at $4.225 after hitting a low of $4.20. This closing price was the lowest since January 10th of this year. And today the drop continues with the current price down another 8.5 cents. These prices are the lowest in 6 months.
The reason for the drop is 1) the storage numbers continue to look better each week; and 2) the weather reports all look for a continuation of the mild summer temperatures this year. I didn’t think we would see $4 or below pricing on gas before September, but we could be headed there earlier than the Fall.
This bodes well for electricity prices as they continue to fall right along with the price of gas. Gas fires the majority of the power plants in Texas. Look to lock in these low rates as any negative storage report could reverse this trend quickly.