Market Commentary

Market Commentary

Weekly Recap- Week Ending 2/09/2018

Stay up to date on the latest information and changes that may impact natural gas and electricity pricing with the Market Commentary. Download a PDF version of this week’s Market Commentary here.

Daily Natural Gas Settlements

March may be the prompt month, but weather continues to be the primary driver of the natural gas futures market. With longer term forecasts shifting to above normal temperatures for Chicago and everything to its East, the NYMEX took a nosedive last week. The March 2018 contract dropped 26.2 cents, or 9.2%, and the 12 month strip fell 5.8%.

Last Week on the NYMEX

Perhaps some are wondering if the drop in natural gas prices is related to or correlated to the stock market’s drop. The simple answer is no. The natural gas commodity market is tied far more to fundamental impacts to supply and demand than it is to another market. Last week saw major drops in natural gas on Monday 2/5 and Friday 2/9. The stock market’s major drops last week came on Monday 2/5 and Thursday 2/8 while Friday 2/9 saw the market increase 300 points.

Natural Gas in US Storage

Inventory levels continue to slump compared to historical benchmarks. That is somewhat expected considering how far above normal the winters of 15/16 and 16/17 turned out. The winter of 13/14 (polar vortex) is not shown in this graph, but it saw inventories reach as low as 827 BCF at the end of the winter.

NOAA 6-10 Day Outlook

Given the record level of production per day (closing in on 80 BCF), analysts are not concerned about making up any storage deficit compared to the past few years. Further, current weather forecasts for both the 6-10 and 11-15 day timeline have shifted over the past week to show significant warming in the eastern third of the country. These forecasts suggest Punxsutawney Phil was wrong this year.

Weekly Commodity Changes in Power Markets (c/kwh)

Most electric markets tracked in the table below experienced a dip alongside the NYMEX natural gas market. We have also started to track the ISO-New England power market in the below table. This was the only market tracked in this table to increase last week.

The above comments regarding the NYMEX futures market are for illustration purposes only and the sole opinion of the author and not IGS Energy, its officers or its employees. Neither the author nor IGS Energy shall be liable for any information contained herein. This communication is no way intended to provide guidance or recommendations as to the value of or advisability of trading in any contract of sale of a commodity for future delivery, security futures product, or swap.

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