No matter where you are in North America its cold. Some places are colder then others. Yesterday, Edmonton recorded the lowest temperature in North America, and one of the coldest temperatures on the planet when the wind chill took mercury down to -58.4 C. (See Edmonton Sun “Only Siberia was colder”)
Natural gas is a seasonal resource where demand peaks are driven by cold weather in the winter and hot weather in the summer. Traditionally the winter heating season begins at the start of November but this year natural gas was still being injected into the U.S. storage system at the end of November. Well, as history has taught us, a good cold snap can change everything in the North American natural gas market and that is what’s happening now.
Last U.S. gas inventories fell 64 billion cubic feet in the week ended Dec. 4 to 3.773 trillion cubic feet, an Energy Information Administration (“EIA”) report showed on Dec. 10. The withdrawal exceeded forecasts for a decline of 45 Bcf. As posted on HRN, last weeks supplies may have really come down with cold weather. The report will come out this Thursday but some analysts have already started to make some estimates including Andrew Potter, an analyst at UBS Securities LLC in Calgary, who stated in a note to clients that supplies may have fallen as much as 150 Bcf last week. A decline that would certainly add to bullish sentiment.
Cold weather and Exxon’s acquisition of XTO Energy have brought out the bulls. Natural gas for January delivery rose 16.9 cents, or 3.3 percent, to settle at $5.332 per million British thermal units at 2:56 p.m. on the New York Mercantile Exchange, the highest closing price since Jan. 12. However, pro-longed cold weather and increased demand will be necessary to erode the current huge surplus of 573 bcf over the five-year average and avoid ending the winter heating season with above average supplies in storage.
