Please visit the Direct Energy Business online customer education center, known as Energy Insights, to view my Weekly Energy Market Update video for April 22, 2013. Receive weekly updates that are sent right to your email inbox: click here to subscribe.
The following is a summary of last week’s market activity and the market outlook:
- Natural gas rallied again with a 19-cent gain on Thursday, following a bullish storage report (the storage refill season is off to a very slow start) and overall cold weather. May futures closed on Friday, April 22 at $4.40 — the highest Prompt Month settle since July 20, 2011. At $4.52, the 12-month Strip is above all Calendar Strips through 2016. Calendars ’14 and ’15 are both at $4.40 for the first time since December 2011 and November 2012, respectively.
- Last week the EIA reported a 31 Bcf injection, which was below expectations of 35-40 Bcf and below the 5-year average (39 Bcf).Current inventory through April 12 is 1,704 Bcf, which is 794 Bcf (31.8%) below last year and 74 Bcf (4.2%) below the 5-year average. With storage depleted over last year and injections off to a slow start, the refill demand has increased, causing more upward price movement.
- Overall U.S. natural gas production is up slightly versus a year ago, but also down slightly versus the all-time domestic production records set in November 2012. Total U.S. rig counts were up by two totaling 379 last week but are still down 52 over the last five weeks. Horizontal rig counts were down five last week and down by 34 over the last five weeks.
- It would seem that a market correction is in order, but that has been the case for a few weeks and the rally has only accelerated. Ongoing strength should be contingent upon ongoing bullish weather and storage trends. Sustained mild weather is the best chance for a dip, but the downside is limited with summer around the corner, which is a key risk point.