The Weather Channel is calling for a blast of cold air running through much of eastern and central U.S. later this week, which should turn out to be the coldest air so far this season. Some light snow may hit parts of the Plains and Midwest as well and it's possible that this all may extend into next week.
Before this recent forecast was released, it was already know that U.S. natural gas stocks were lower than a year ago and well under the overall five-year average, all of which is bullish.
As expected, natural gas stocks are getting a boost as well this morning, which includes names such as CHK +9%, SWN +5.4%, RRC +5%, COG +5% and CRK +3%. Other natural gas names include APC, XOM, BP, DVN, AR, COP, CVX, EOG, UPL, GPOR, CLR, QEP and XEC.
Natural gas prices usually get a boost heading into winter as U.S. inventory is drawn down. The country has been in ‘build' season since the week ending April 27.
Since then, the U.S. Department of Energy's Energy Information Administration (EIA) has reported seeing 27 weekly natural gas builds in a row, pushing inventory levels to 3,143 Bcf, up from 1,343.
With that said, the U.S. ‘withdrawal' season typically runs between November and April every year, so we can expect to start seeing natural gas being withdrawn from storage areas any day now.
The most recent update on U.S. natural gas storage came from the EIA last Thursday. The agency reported the stocks (aka inventory levels) were 623 Bcf lower than a year ago at this same time of the year. Also, ending stocks of 3,143 Bcf are 638 below the five-year average of 3,784 Bcf, the lowest level in 15 years.
This represents a net increase of 48 Bcf from the previous week. Stocks were 623 Bcf less than last year at this time and 638 Bcf below the five-year average of 3,781 Bcf. At 3,143 Bcf, total working gas is below the five-year historical range.
Again, we knew where U.S. storage levels were well before this recent weather forecast was released. So, to be clear, today's move in natural gas is purely being driven by this recent weather outlook by the Weather Channel.
As we know, weather outlooks can change often, so let's see if today's move in natural gas prices can even hold.
In current trade, December natural gas futures are up $0.23 (or +7%) at $3.51/MMBtu, after rising as high as $3.57/MMBtu earlier this morning.