Winter 2012-2013 has been virtually nonexistent, just like Manti Te’o’s girlfriend. Pittsburgh Steelers please don’t draft him, let the Browns have him. The lack of winter cold has brought the bears out, pushing the February 2013 prompt contract almost to its all-time low established way back in April 2012. Recently, the market has been bullish because of some colder weather and weaker natural gas storage numbers, including a recent storage report that showed the largest withdrawal in two years! However, longer term market outlook remains overall bearish, but not to the extent of 2012. Consequently, don’t expect natural gas under $2.00 MMBtu anytime soon.
Thus far, this has been a well above normal winter and only sustained below normal temperatures could normalize winter 2012-2013, which brings me to Groundhog Day. I am not talking about waking up and doing the same monotonous thing over and over again like Bill Murray. Fortunately, I don’t have those types of Groundhog days because I get to work with the gregarious and fun Mike Krygowski [a fellow blogger].
I am talking about the annual Groundhog Day celebrated in Punxsutawney, Pennsylvania on February 2. If Punxsutawney Phil sees his shadow, winter is predicted for another six weeks. Obviously I don’t believe in this folklore, but hypothetically, what would it mean to the market if winter continues for six more weeks?
Short answer: it will be very bullish. The market has been beaten down over the past years and has grasped at straws to find support that it should increase. Colder weather into March will be a boon for gas, dramatically eroding storage inventories that are strong and close in magnitude to last year at this time.
On the other hand, if he does not see his shadow and winter ends early, expect the market to plummet like Lance Armstrong’s public image, but not in the magnitude of 2012.
One more note. Last year, Phil saw his shadow and gas rose 17 cents. Maybe he is on to something?
Check out our first-ever infographic explaining the potential market based on whether or not Phil sees his shadow, which he did not. Expect an early spring!