Natural Gas Monthly Fundamental Forecast March 2014

Outlook and Recommendation

Natural Gas tumbled at the end of the month to end at 4.633 after hitting a record high of 6.378 as the US froze for two months as the “polar vortex” storms bombarded the US from East to West. Natural gas futures prices for May 2014 delivery (for the five-day period ending February 6, 2014) averaged $4.48/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for May 2014 contracts at $3.28/MMBtu and $6.13/MMBtu, respectively. At this time last year, the natural gas futures contract for May 2013 averaged $3.46/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $2.61/MMBtu and $4.58/MMBtu.

Very cold temperatures in early January led to new record-high withdrawals of natural gas from storage in a season already characterized by larger-than-normal storage withdrawals. Several more days of brutal cold came in the following weeks of January with working natural gas storage withdrawals exceeding 200 billion cubic feet (Bcf) for three of the weeks during the month. For the second month in a row, the forecast end-of-March 2014 working inventory has been revised downward to reflect recent very high withdrawals. EIA now projects inventories will end this heating season at 1,331 Bcf, the lowest end-of-season level since 2008.

The natural gas February futures contract expired at $5.56/MMBtu, which was a four-year high. Pipeline constraints in the Northeast often lead to price increases during times of high winter demand. Last month, spot market prices in the Northeast were routinely in the double digits, with New York prices settling in the $90/MMBtu range on several days in January. The effect of spot market fluctuations on end-use prices depends on several factors

Preliminary total consumption for 2013 is a record at 26,034 billion cubic feet (Bcf). Deliveries to commercial consumers in 2013 were the largest ever reported at 3,289 Bcf and deliveries to residential and industrial customers were at the highest levels realized since 2003. Deliveries to electric power consumers were the only sector that declined in volume from 2012 to 2013. December 2013 total consumption is a record for any month at 2,912 Bcf.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

 

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