Shoulder Season

The U.S. natural gas market has been dogged all summer by uncertainty on both sides of the supply-demand equation and a looming threat of storage constraints and supply congestion by the end of the gas storage injection season. But production volumes have flattened and demand has responded at record levels taking some of the edge off the bearish sentiment. Cash and futures prices at U.S. benchmark Henry Hub in Louisiana have traded in a remarkably tight 60-cent range all summer and averaged $2.75/MMBtu season to date, indicating the market has found an equilibrium. However with just two months of the natural gas summer season left and the hottest, highest-demand months behind us, the price stalemate may come under pressure, with more downside risk in the near-term. In today’s blog, we revisit where the supply-demand balance stands and what it tells us about where the gas market is headed in the near term.

NYMEX natural gas prices have fallen 16 percent since reaching their high for the year so far of $4.408/MMBtu on April 19, 2013. The NYMEX August contract closed at $3.582/MMBtu on June 27, 2013.The market is currently in the low demand shoulder season. Winter is over and summer heat is on the way but temperatures in May and June are not typically high enough to significantly increase demand for air conditioning.  Today we review shoulder season gas market fundamentals.