Weather has pushed the minimum back a few weeks, and there's still a lot of room to increase supply just with pipes, but $2.72 is crazy cheap compared to oil.
With futures flat out to 4 years, seems like a good deal to long something in the 2-4 year range, unless there's something I don't know about even more potential supply.
The thinking has to be with all the active oil wells, there must be a lot of NG coming online. The price does seem cheap.
Agree that the price seems extraordinarily cheap with storage this low.....more than 800 bcf LESS than a year ago and around -450 bcf lower than the 5 year average. But the price is not higher than a year ago and is much lower than the 5 year average.
Would think the price would be above $3 here based on just that. However, there apparently is boatloads of record supply ready to gush in during the injection season and the market has been looking ahead at those mega bearish fundamentals.........even though the last 2 storage reports have been bullish surprises.
Is a draw of -36 bcf this late in the season unprecedented?
Just glancing at my NG records, it looks like this is the biggest draw so late in the season in the last decade.
However, we had similar draws for the same week in the following years:
2007 -46 bcf
2003 -46 bcf
2000 -33 bcf
1997 -22 bcf
1996 -36 bcf
1997 featured another -5 bcf draw the following week which was the latest draw in history.
The record cold recently in the high demand/population centers of the Midwest/East is the reason for this very late season draw. The market "knows" that this cold will not last forever because the angle of the sun is 100% certain to continue to get higher in the sky and even record cold, if it continued in to May would not result in much heating.
In fact, cold starts turning bearish in May when its in the south and below normal temperatures from then thru August are bearish........with cooling degree days calculating how much electricity is being used for air conditioning........lots of it generated by burning natural gas.
The market being down $700/contract on a bullish surprise is terrible price action. However, the market is looking ahead to a weather pattern change. Not only do seasonal temperatures warm the fastest at this time of year but the Arctic blasts that have been bombarding the north(where they count the most in April, where the average is still cold) will give way to temperatures that are closer to normal. The southeast will have the coolest weather compared to average............and in late April, that won't cause much heating demand. In fact, in May its bearish because that area starts looking at cooling demand.
http://www.cpc.ncep.noaa.gov/products/predictions/610day/
http://www.cpc.ncep.noaa.gov/products/predictions/610day/
Another item is that large speculative funds often control the price of many of our commodities. If they want to build up a massive short position in natural gas, looking months ahead at the huge supplies that will eventually pressure prices, they can sell the heck out of it and control the price.