Natural gas bulls will likely stay penned up this winter if NGI's Forward Look data are to be believed. In the worst winter natural gas price outlook since 2012, the balance of winter forward curve pricing for Algonquin Citygate -- a good barometer of Northeastern pricing -- looks awfully flat, with price projections less than half of what they were a year ago.
Ample natural gas production, less pipeline bottlenecks, a mild winter weather forecast and a record amount of gas in storage have teamed up to depress price forecasts during the normally volatile winter months.
Looking at forward prices on Friday the 13th for December through March, producers could curse the unluckiness of the day. On this day a year ago, winter 2014-2015 natural gas forward prices at Algonquin were expected to trade as high as $21.038 in January 2015, thanks to fears of a replay of the brutal string of polar vortices during winter 2013-14, which spiked prices. Since last winter actually ended up being much tamer than expected, Algonquin's peak this winter -- as traded on Nov. 13 -- is only expected to reach $7.940 in February 2016, according to NGI's Forward Look data.
It seems other Northeast points are being crushed with supply and forecasted mild weather as well. As of November 13, Transco Zone 6 NY for December shows a fixed price of $3.231 and TETCO M3 deliveries came in at a pitiful $2.245. On the same day last year, December 2014 Transco Zone 6 NY showed a fixed price of $7.480 and TETCO M3 deliveries was $5.015.
"These factors come together to produce probably the most bearish winter price outlook since at least 2012," said NGI markets analyst Nate Harrison. "On this same day last year Algonquin Citygate traders were looking at December in the sixteen dollar range and January up above twenty-one. This year winter pricing there is expected to top out around eight bucks."
The natural gas storage situation continues to be an embarrassment of riches, especially if the winter weather forecast plays out as currently expected.
While a storage injection of 49 Bcf announced Friday morning for the week ending Nov. 6 came in just below consensus industry expectations, the build also set a new record level of gas in storage at 3,978, eclipsing the old record of 3,929 Bcf established in late October 2012.
Whether the storage build marks the last of the season is still anyone's guess, but mild temperatures dominating many eastern population centers this week point to an opportunity that the 4 Tcf plateau may be crossed before the withdrawal season gets under way.
While the injection was not unexpected it is November after all and withdrawal season should be ramping up. While commenting on last week's storage injection, Pat Rau, NGI director of strategy and research, said, "Any injection we get from here through the next few weeks is bearish. Cold weather can't come soon enough for the market which may soon have difficulty finding a place to put all the extra gas."
Those looking for winter’s first real cold burst might be waiting for a while. Looking to the six- to 10-day temperature forecast from the National Weather Service, Nov. 19-23 is expected to bring a continuation of above normal and much above normal temperatures to the eastern half of the United States, while much of the western half of the nation experiences below normal to much below normal readings.
Want to keep track of natural gas price projections as the 2015-2016 winter unfolds, sign up for a free trial to NGI's Forward Look today and also receive Nov. 13th historical forward look prices from the past four years.