Forward Look

Prompt-month and balance-of-winter (December-March) prices at a couple of Northeast natural gas market hubs were pressured during the week as ample production and stout inventories have left the region awash in supplies given the absence of cold weather.

A storage report that was generally in line with market expectations and a lack of demand sent natural gas forwards markets tumbling between 15 and 20 cents across most of the U.S. during the week.

The surprise storage injection of 106 Bcf reported for the week ending Sept. 18 expanded the overall surplus U.S. natural gas inventories have over both year-ago and five-year levels. But lagging inventory in parts of the Midwest could cause concern this winter despite an increase in supplies available for the region, sources say.

Natural gas markets appear to be buying into multiple weather forecasts calling for a mild winter thanks to a strong El Nino pattern, as winter prices are sitting well below year-ago levels and some markets are even sporting a $2 handle.

While early indications point to a repeat of last year’s harsh winter for the U.S. Midwest, it appears natural gas markets in the region are well-prepared as forward prices are currently averaging about 40 cents below year-ago levels thanks to ample production and increased pipeline capacity.

October forward fixed prices fell across the board between trading Friday, Aug. 28, and Wednesday, Sept. 2, as traders started to focus on fall and began to put summer temperature concerns in the rearview mirror. On average, points covered byNGI’s Forward Look dropped 4.4 cents and were brought lower by a falling Henry Hub October futures contract that dropped 6.7 cents from $2.175 to $2.648 over the period.

Amongst milder weather and the comfortable lethargy of August trading, the forward market as measured by NGI’s Forward Lookmoved up just less than three cents on average since the close of trading on Aug. 21. For traders at many index locations, the price of September gas seems to have already been worked out with the start of the month less than a week away. However, there is one exception.

Despite a full roster of planned and already constructed pipeline projects aimed at uncorking the glut of supply from the Appalachian Basin, the average basis of U.S. forward market locations covered byNGI’s Forward Look for the remainder of 2015 came in at negative 3.3 cents during trading on Aug. 19. Said differently, the average price of natural gas across the United States is expected today to be 3.3 cents less than the Henry Hub over the course of September, October, November and December 2015, and the gap is expected to get much wider before narrowing.

Natural gas forward points tracked by NGI took their cue over the last week from the rising screen as heat in population centers across the country teamed to put upward pressure on prices.