Just in time for Halloween, the threat of a cold weekend seemed to spook the markets this week. For this seven-day report period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) rose 2.8% closing at $0.375/therm while the 12-month average price for peak power on the PJM rose 3%.
This price increase came as a surprise to many analysts, especially considering this weeks' impressive injection of 87 Bcf into working storage. Many maintain that the market was simply over reacting to news of the fist cold snap of the season, due to arrive this weekend. This price increase was even more puzzling when you factor in NOAA's 8-10 day outlook calling for the return of warm weather and above average temperatures for the first two weeks of November.
Natural gas storage levels will be a key variable to watch over the next few weeks. With winter on the way and inventories still sitting 7% below the five-year average, many analysts are wondering if the return of warmer weather will provide us the opportunity to churn out a few more storage injections. The traditional storage season ends November 1st, but if temperatures are truly warmer than normal, and less gas is needed for heating, we could continue to erode the storage defict and possibly see some downward pressure on prices. Production remains at an all-time high. Will the weather hold out long enough for us to hit 3.7 Tcf before winter?