Natural Gas Storage
Mild December Weather Curbs Withdrawals - Storage Levels Finally within 5-Year Average RangeAs of EIA’s December 26th Storage Report, storage levels were at 3,220 BCF; 232 BCF above the same period in 2013, yet still below the 5-Year average by 3%. The current 3,220 BCF storage level marks the first time since November, 2013 in which total working gas is within the 5-year historic range (the gray band shown on the chart below). We started this withdrawal season at a 10% deficit below historic 5-year averages. Due to our mild December, withdrawals have been small and have not bled reserves like last December and January.
Working Gas in Underground Storage Compared with the 5-Year Maximum and Minimum - Billion Cubic Feet
Weather Forecast: Colder Temperatures for the South
January has started out with frigid cold, but is expected to end mild throughout most of the US. Only Texas and the Central States are predicted to experience below-normal temperatures.
The long-range forecast show below-normal temperatures for Texas through Virginia. The West Coast will experience above normal temperatures.
December was a great month for energy prices. Warm temperatures dampened the heating demand for natural gas and record high gas production applied downward pressure to energy prices; causing natural gas prices to drop 6% and electricity prices dropped 1%. The last two weeks of December were significant with the NYMEX average 12-month price for natural gas closing down 12% and the PJM 12-month average price for peak power dropping 7%.
February natural gas contracts continued to fall to $2.882/MMBtu, despite the cold spell in early January reaching across most of the country. This week’s cold temps are expected to end and a return to above-normal temperatures is expected. Short-Term cold spells should be expected, but unlike last winter, they are not expected to last for extended periods.
As natural gas prices go, so follows electricity prices. Most all electric markets have seen a corresponding dip in prices; however not as noteworthy. Our biggest concern today on the electric front comes from significant increases on the utility standard/default service rates. Large increases have been enacted in the Northeast and Midwest.
Mild December Weather Offsets Low Storage Levels
This Holiday Season brought us three gifts: mild December temperatures, limited storage withdrawals, and record gas production levels throughout the injection season. The combination of these events has offset lower-than-normal storage levels. As a result, natural gas prices fell to the lowest levels in 2 years, down 35% since November. At a time when prices usually escalate ahead of the peak season for heating demand, the warmer-than-normal December and record production has limited storage withdrawals.