Ghost on the (Trading) Floor - Why $3 Natural Gas Continues to Elude the Market
The U.S. natural gas storage inventory lagged behind year-ago and five-year average levels throughout this past winter. The market started the withdrawal season in November 2017 with about 200 Bcf less in storage than the prior year. That year-on-year deficit subsequently ballooned to more than 600 Bcf. Compared to the five-year average, the inventory went from about 100 Bcf lower in November to a more than 300-Bcf deficit now, at the beginning of spring. An expanding deficit in storage is typically a bullish indicator for price. Yet, the CME/NYMEX Henry Hub natural gas futures contract struggled to hold onto the $3.00/MMBtu level it started the season with in mid-November, and, in fact, has retreated back to an average near $2.70 in the past couple of months — about 25 cents under where it traded a year ago. Today, we look at the supply-demand factors keeping a lid on the futures price.
