Saturday, August 21, 2021 at 1:52PM
Since reaching a high of around $4.20 in prompt month pricing, natural gas prices have been in a downward trend, with the prompt month September contract falling as low as $3.75 briefly this week, before pushing back a little higher, ending the week near the $3.85 level. We had warned clients that some selling pressure was possible, as this week's EIA report was likely to reflect much looser supply / demand balances than we had seen in the last few months. This is exactly what happened, as the report showed a 42 bcf build for the week ending 8/13 (46 bcf was the official increase, but 4 bcf was due to a reclassification, making the true build 42 bcf). This was quite high, considering that it was the hottest week of summer, at just over 90 GWDDs. When looking the storage builds vs GWDDs, we find this week's data point coming in above the trend lines of the last three years. If the balance reflected in this report were to be extrapolated forward, there would be little reason for concern as far as storage levels, but it is likely that this number will be revealed to be an anomaly, with re-tightening expected over the next couple of weeks, as this week's report was inflated in large part due to very high wind generation, which has since subsided. Supply levels remain much lower than they were at this time in both 2019 and 2020, thanks to high export levels, and no production growth over the last several months. Data courtesy of Criterion Research, LLC. Weather forecasts have turned hotter recently, as well, with the week ending 8/27 sneaking to potentially a record level in terms of GWDD totals for time of year. With supply / demand balances showing signs of re-tightening, and no material gains in production, so far, plus hotter weather on the way, one could make the case for a move back higher in prices as we head into next week's expiration of the September contract, as projected storage levels for the end of injection season are not yet high enough to generate much comfort. Obviously, one must be very nimble in this market, however, as data can, and often does change. This is where our daily reports become invaluable, as we not only present up-to-date weather and fundamentals data, but interpret what it all means in terms of directing price action, thanks to our expertise in both weather forecasting and fundamentals analysis. Sign up for a 10-day FREE trial here to take a look at all of the products we offer to keep the active trader in-touch, and ahead of potential market moves.