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Daily Market Update November 8, 2018

Early Morning Update

The Dec18 natural gas contract is trading down $0.01 at $3.54. The Dec18 crude contract is down $0.07 at $61.60.

 

Summary

The NYMEX December natural gas futures contract remained flat and settled at $3.555/MMBtu, while the 12-month strip decreased slightly to settle at $2.974. The change in the weather forecast from November 1 to November 5 has been tremendous. Total U.S. heating degree days (HDDs) in the three week forecast have climbed from 243 HDDs on November 1 to 331 HDDs on November 5, a 36% increase. On Monday, the 12-month strip increased by $0.096/MMBtu from November 1, which is the highest daily price increase in the 12-month strip seen all year. As weather forecasts for November trend colder, the market appears to be growing more concerned about having sufficient gas to meet demand this winter. The ability for U.S. power burn demand to reduce due to natural-gas fired to coal-fired switching has been reduced, as recent low gas prices have pushed many coal plants into retirement. Based on EIA projections, coal’s market share of power generation will fall from 30% in 2017 to 27% in 2019, while the market share of natural gas power generation will increase from 32% to 35% in the same time frame. This reduced power generation switching ability, coupled with historically low storage levels, could eliminate the recent trend of cheap gas and continue to push NYMEX prices further up.

 

Market Update 110818

Market Settles 110718

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