Natural Gas Prices: Seasonal Rally Cancelled?

| September 19, 2014 | 0 Comments

Yesterday’s Energy Information Administration (EIA) natural gas inventory report was another whopper.   

The government agency reported a 90 billion cubic foot (bcf) increase in working gas storage levels for the week of September 12th.   Upon hearing the news, investors sent natural gas down $0.10 to $3.91 mmBtu. 

While inventories are still 12.2% shy of last year and 13.3% below the 5-year average, investors are instead focusing on outsized weekly storage additions.  Last week’s inventory build was double last year’s injection of 46 bcf and well above the 5-year average build of 74 bcf. 

What’s all that mean in plain English? 

US natural gas inventory levels are still very low relative to years past.  But enormous weekly storage additions are keeping the price of natural gas from rising. 

Speaking of price, take a look at a chart…

Natural Gas

As you can see, natural gas has been trading in a range between $3.75 and $4.00 since mid-July.  Given yesterday’s bearish inventory report, I wouldn’t be surprised to see the commodity trade down to the bottom of the range again in coming weeks. 

But remember… 

Winter is on its way.    

And according to the newest edition of the Farmers’ Almanac, it’s going to be another bitterly cold one for Americans.   

As you may know, the Farmers’ Almanac is an annual weather publication first published in 1818.   While some analysts are quick to dismiss the Almanac’s long-range forecasts, I always pay close attention to what it has to say.   

Remember, the publication was spot on with their call for frigid winter temperatures in 2014. 

Here’s what the Almanac sees for the upcoming winter… 

Farmers’ Almanac

According to the Almanac, the winter of 2014-15 will provide below-normal temperatures for approximately three-quarters of the US.  If the frigid outlook comes to fruition, natural gas demand will explode as consumers crank up the heat- just like last year.   

As you may remember, natural gas surged over $6 last February as investors realized inventory was vanishing at an alarming pace. 

So when will this commodity start rising? 

The seasonal natural gas rally that usually kicks off in late September may be a bit delayed this year.  Large storage injections will likely keep the natural gas market under wraps until the first bout of cold weather hits.  

But once Old Man Winter arrives, we’ll likely see bulls return to the natural gas market in force! 

Until Next Time, 

Justin Bennett

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Category: Commodities

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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