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Weekly Energy Market Update August 12, 2013

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Weekly Energy Market Update video for August 12, 2013. 

The following is a summary of last week’s market activity and the market outlook:

Once again, weather forecasts have dominated the market this past week. With mild temperatures continuing and a large natural gas storage report on Thursday, the market dropped on Friday to new 8-month lows for the near-term and all-time lows for the Calendar Strips.

Last week the EIA reported 96 Bcf injection, which included a reclassification of gas of 14 Bcf, attributable to last week. At 82 Bcf, the report was still above expectations (79 Bcf), above last year (25 Bcf) and above the 5-year average (42 Bcf). If the reclassification is included, it would be the second largest August injection on record. It is the 19th consecutive injection that has exceeded the same week last year. Current inventory through August 2 is 2,941 Bcf, which is 9.2% below last year and now 0.7% above the 5-year average.

Domestic gas production output remains strong at 64.9 Bcf/day - just below records from last month -and up 1.6 Bcf/day year over year. Even though industrial demand for gas has grown since last year, gas demand for power generation is at 25.9 Bcf/day versus 30.1 Bcf/day for a similar day last year.

Summer risk is winding down due to mild weather forecasts and ongoing strong storage injections. Prices are currently below what we would consider the "expected range," primarily due to weather and natural gas storage, so consider the following as you make decisions about your buying strategy:

Natural gas prices are at or near lows for many terms

Mild weather and strong storage injections cannot be counted on to continue

As we saw in 2012, low prices eventually can cause a bullish reaction by generators and producers

Regional electricity factors may add significant price risk beyond natural gas

The long-term outlook is bullish compared to the near-term

Posted: August 13, 2013