The natural gas market tested key technical support levels last week revisiting similar market trends seen just one week ago. After settling down on Thursday, the market bounced once again holding key support levels as colder temperatures brought some unexpected heating demand to sections of the Midwest. The cold front dropped temperatures more than 15 degrees in some areas spiking short term demand for those regions. Cash prices rebounded by more than 40-50 cents in certain areas.
As weather forecasts fluctuate the current storage situation continues to be the key fundamental influencing this market. The latest storage report presented by the EIA showed an injection of 25 BCF bringing the current inventory level to 1.855 TCF. At that level inventories are 460 BCF above last year and 295 BCF above the 5-year average.
Crude oil continues to trade over the $80.00 mark even as it has fallen more than $2.00 in the last few trading sessions on a stronger US dollar. Crude oil is traded in US dollars and has a high correlation to that currency. A stronger dollar typically makes crude oil more expensive in other countries as currency conversions must be made to trade the commodity.
According to Baker Hughes the latest total rig count fell by three to 748 rigs. Oil rigs dropped by two while gas rigs fell by one. One year ago, the total rig count sat at 693 rigs.
This week’s additional graphic from S&P Global Commodity Insight depicts January and February natural gas consumption in the Northeast and Midwest regions of the US. It is important to note that over 20% percent less natural gas was consumed in those months from the prior year in both regions. The West region, which is not pictured in the graphic, experienced a very cold winter and had an increase in natural gas demand from the power sector of approximately 23%.