After reading the EIA’s assessment of natural gas which is looking for a sharp drawdown in stock levels over the winter (should winter be a more normal one), I revisited the March/April natural gas spread to see what was going on… But first, here is the EIA from the Short Term Energy Outlook released last week:
“EIA estimates that total U.S. working natural gas in storage ended October at almost 4.0 trillion cubic feet (Tcf), 5% more than the five-year (2015–19) average and the second highest end-of-October level on record. However, because EIA forecasts less U.S. natural gas production this winter than last winter, EIA forecasts that inventory draws will outpace the five-year average during the heating season (October–March) and end March 2021 at 1.5 Tcf, which would be 16% lower than the 2016–20 average.”
And here is John Kemp, Reuters, on natural gas prices going forward:
“What happens next depends critically on temperatures. Electricity producers have continued to retire coal-fired generators, ensuring marginal energy consumption in any cold spell will rely on gas more than ever before.
If there is a sustained period of colder than normal weather in December and January, such as in 2016/17 and 2017/18, inventories will dwindle rapidly and push up prices sharply.”
A special thanks to CQG.com for giving me access to their charts and data!
And here is March/April natural gas futures doing what they do… Not waiting for winter weather…
And here are some other famous March/April natural gas spreads… Hurricanes (calendar 2005, but the March/April 2006 spread), lack of hurricanes (calendar 2006) and cold snaps (calendar 2013/2014) all created havoc in these spreads… Here is Calendar 2013/14
Here is 2005 (Katrina)…
Cal 2006/07, the lack of hurricane activity crushed this spread in September through the rest of the year…