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Weekly Energy Market Update April 21, 2014

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Below is the Direct Energy Business Weekly Energy Market Update video for April 21, 2014. We embedded this video right into the blog post, so you don’t have to leave this page to view it. The written summary is still below too.

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

Natural gas futures continued their recent strength breaking out of the range that had held since mid-February. Futures fell early in the week due to moderating temps, but a bullish storage report on Thursday caused a swift rally. Thursday’s close at $4.74 was the highest for May contract since February 21.

The fundamentals picture remains relatively unchanged with warming spring temperatures and huge storage deficits.

Demand is falling as the weather moderates, but there are several key aspects that can impact near-term price trends:

  • Production trends – current production up more than 2.5 Bcf/day
  • Generation trends – expect more maintenance this year, which is bullish (more gas used to make this up); but higher NYMEX should cause gas-to-coal switching, which could be bearish
  • Weather – some near-term cold, but the market is expecting big injections over the next two weeks
  • Summer weather – still 4 to 6 weeks from significant risk of high temperatures for most markets

The market is now focused on storage replenishment, and that concern has clearly provided impetus for the recent rally to top the two-month price range.

Long-term: Discounts versus near-term remain in place with the curve backwardated through Calendar 2016. Lack of news does not mean lack of risk. Take advantage of any dips, when possible, but don’t be greedy.


Posted: April 21, 2014