Market Commentary

Weekly Recap

November 10, 2014

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  • Fresh off the winter of the Polar Vortex, traders are more sensitive to cold weather earlier this year than usual. Continued cold weather forecasts have put the NYMEX in a severe bullish trend for upcoming winter. In the graph to the right, the 12 month average has been split in two: Dec-14 through Mar-15 and Apr-15 through Nov-15. The 4 month strip for the rest of the winter (in orange) has moved almost in parallel with the prompt month (in green) while the back part of the one year strip (in blue) has remained relatively flat. This dynamic limited the 12 month strip to a 7% increase last week while the prompt month gained nearly double that (13.9%).
  •  NOAA’s 6-10 day forecast says it all as intense cooling continues to affect pricing. Initial forecasts for a warm November have completely flipped for almost the entire US.
  • Thursday’s storage report announced a 91 BCF injection. This takes inventories to over 3.5 TCF and brings the deficit to the 5 year average down under 300 BCF. Even though the injection exceeded expectations of an injection in the 85-90 BCF range and was significantly above historical averages for the week, the bullishness of the weather fore-casts overshadowed the report and its information. For all intents and purposes, traders essentially ignored the   inventory report for the week.
  • Electricity pricing has joined natural gas’ bullishness. PJM markets all gained about 5% or more last week with PA reaching a 6.4% increase. New York City gained 5.8%.