Natural Gas Above $3 Requires Braving Record Output, UnHelpful Chart/Weather
After a kiss of death from overbearing production that almost returned US natural gas futures to mid-$2 pricing, the obverse kiss of life emerged from speculators this week to restore mid-$3 pricing.
For the love fest to continue, two things might be needed: leaner production and fulfillment of the trading gap that occurred before the comeback rally.
Until August came along, the year has been one of the most maddening ones for gas bulls, who get up each time to get squashed again by record production, often benign weather that needs neither heating or cooling and spotty export demand for liquefied natural gas, or LNG.
The sum effect of all these, of course, is a stockpile overhang running double-digits higher than a year ago and looking impossible to clear right away.
Yet, like the skies opening up after a storm, things suddenly began to brighten up for gas longs: Production started tapering, the volume of gas burned for power generation became consistent, LNG takeup improved and gas in storage started melting.
Last week though, the horrors of the past were revisited on the gas market — some two weeks earlier than Halloween actually.
The jolt came in the form of the government’s weekly storage report on gas for the week ended Oct. 13 that came in at 17 billion cubic feet, or bcf, higher than the forecast level of 80.
In the words of John Sodergreen — who authors another trade publication on gas called ‘The Desk’, “last week’s monster 97-Bcf build caught just about everybody by surprise, and rightly so.” He adds:
“After the 97-bcf surprise last week, this week looks like another coin toss. Odds are this week’s report comes in way lower than the survey, though for all the wrong reasons.
“Recall, too, that East,
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