If you have been following my notes you have noticed natural gas production in the US is at record highs due to fracking. For 30 straight weeks the natural gas build up in our storage numbers exceeded the five year average, and this got the amount of gas in storage to a comfortable level for this coming winter heating season.
Two weeks ago we finally missed on the five-year average after seven and a half months with a small draw down of 17 bcf. Then the big storm hit up north and Buffalo got upwards of seven FEET of lake-affect snow. Prices for natural gas spiked to $4.53. They came down a bit, and then spiked back to $4.53.
When it became clear this was not what our total winter would look like, and warmer weather was coming right away behind this storm, prices dropped quickly to $4.006. Today we had the storage report of the season with the first big draw down due to this specific storm. Analysts were looking for a draw of 146 bcf but the report showed a draw of 162 bcf, much higher than expected.
Sure enough, the current natural gas contract spiked immediately after release of the report to $4.529, but then finished the day at $4.355, DOWN 5 cents for the day.
My point is as I have stated in my prior notes – natural gas is trading in a range between $4 and $4.53. Until we see exactly what the winter weather looks like long term we should see no change in this trading range.