Natural Gas Outlook
The extremely cold weather which blanketed the U.S. made natural gas one hot market. At one time this week, all 48 of the lower states had at least one area below freezing. Unlike last year, it looks like the current cold weather system will not become a lingering event. This is likely to trigger a fresh round of profit-taking, leading to increased volatility.
This week, after early weakness, March Natural Gas futures soared to a new one-week high. One of the catalysts for the rally was the cold weather system blanketing most of the U.S., the other came later in the week when the Energy Information Administration reported that gas stockpiles fell 17 billion cubic feet in the week-ended November 14 to 3.594. This number topped the five-year average decline of 10 billion for the period. Most traders and energy analysts were looking for a drop of about 11 billion.
The EIA also reported the deficit to five-year average inventory levels widened to 6.4 percent from 6.2 percent the previous week. This was its first expansion since March. Supplies were also 5.3 percent below year-earlier estimates. Last week’s number was 5.7 percent. This drop in supply reflected the greater demand caused by the cold weather.
Traders are already estimating that next week’s report is likely to show that supply declined by 150 billion cubic feet. If you recall, the futures market anticipates events so it is possible that this draw down may have…