Entering the winter heating cycle, natural gas analysts were looking at the weather forecasts and finding little guidance. The weather reporters were split, with half of them saying it would be a moderate winter, and others saying it would be colder then normal. Well its getting cold… and fast.
Harsh winter weather conditions are hammering the U.S. and Canada. Storms are hitting the east, and a deep freeze is hitting the west and right across both countries natural gas is being used to keep people cozy in their homes. Last week, there was only 2 Bcf of natural gas added to the U.S. storage. A cold weather snap can change the natural gas inventory in a day. We may see a drawn on existing natural gas supplies in tomorrow’s weekly natural gas inventory report from the Energy Information Administration but we will most likely see a draw next Thursday, when this week’s winter storms and deep freeze are reflected in the report.
Stephen Schork, editor of the energy advisory newsletter the Schork Report, recently told the Wall Street Journal, “The bottom line is that you are at the end of November, and you are still putting gas in the ground.” He said it would take an “ice age” to send prices significantly higher”. For some that “ice age” has arrived. Depending on where you live.
An extended cold weather trend will draw down inventories quite rapidly, which may result in upward pressure on the price of natural gas as speculators enter the market. However, keep in mind that that U.S. natural gas inventories are at an all time high. According to the EIA:
Assuming a storage withdrawal between the end of November and the end of March about 6.1 percent (113 Bcf) greater than the previous 5-year average for that period, end-of-winter (March 31, 2010) stocks will be about 1,845 Bcf. This would be the highest end-of-winter storage level since 1991, when inventories measured 1,912 Bcf.
For natural gas producers and investors the cold winter weather is welcome. The fact remains that we have a renewed abundance of domestic natural gas. And that is a huge benefit for the long term, clean energy requirements of North America.
CBS News: “Monster” Winter Storm Heads East
