From the CME:
The Nat Gas futures contract has been trying to push higher since the immediate sell-off after yesterday's EIA inventory release. However, as of this writing it looks like that effort is starting to wane. Aside from the fact that yesterday's net withdrawal from inventory was bullish versus last year and the five year average for the same week it is not going to be repeated in next week's inventory based on the warm spell this week. In addition the inventory withdrawals for the next several weeks are likely to underperform versus history basis the latest NOAA six to ten day and eight to fourteen day forecast which both remain bearish.
The six to ten day forecast covering the period Feb 6 to the 10th is projecting above normal temperatures across the eastern two thirds of the country with the mid-west expecting strongly warmer temperatures. The eight to fourteen day forecast is marginally less bearish in that the above normal temperatures are forecast for the eastern half of the country for the period February 8th through the 14th. As it looks at the moment the first half of the February will likely experience less than normal levels of heating demand for the first half of February and thus not supportive of higher prices or at least not supportive of the market breaking out of the upside of the trading range (about $3.50/mmbtu) during that period.
This now leaves only half of the month of February to mount a sustained winter spell before the warming that is projected to occur hits the last official winter heating month... March. Yes this winter heating season has been better from a heating demand perspective than last year but it will still be below normal when the numbers are tallied at the end of March and inventories at the end of the heating season will be above normal.
The latest from the EIA Weekly Nat Gas reported High demand caused Transcontinental Pipeline to issue a system-wide operational flow order on January 24 to correct imbalances. The OFO was lifted the next day. Pipeline imports from Canada helped fill the need for more natural gas. Imports on Wednesday, January 24 and 25 were about 1.7 Bcf/d, almost twice the level at the end of the week when the weather warmed up. Prices began falling Friday, and Northeast prices hit their low for the week on Tuesday (Boston at $4.60 per MMBtu, New York at $3.47 per MMBtu), but expectations of a return of cold weather by the weekend likely contributed to price increases the next day. Even with continued mild temperatures on Wednesday, New York ended the week at $3.99 per MMBtu, while Boston ended at $7.42 per MMBtu.
During the report week supply remained flat and demand fell. Despite the cold weather in the beginning of the week east of the Mississippi, and high heating demand the first few days of the report week, residential and commercial consumption averaged out at 11.6 percent below last week, according to estimates from Bentek. Consumption of natural gas for electric power and industrial consumption also fell by 13.7 percent and 3.0 percent, respectively. Canadian imports fell 9.9 percent and LNG sendout remained at minimal levels. Production rose 1 percent week over week, but was 0.3 percent lower than the same time last year....MORE
