Any gains made on Thursday fizzled Friday as traders focused on larger-than-average natural gas inventories. As a result, natural gas for January delivery settled down 14 cents, or 4.1 percent, to $3.317 a million British thermal units on the New York Mercantile Exchange.
The settlement was the lowest since Nov. 18, when front-month futures sank to a one-year low of $3.316/MMBtu.
Thursday’s increase was attributed to the EIA’s report showing a larger-than-expected draw in natural gas inventories. Traders initially took the Department of Energy report as a sign of improving demand for gas-fired heating. The EIA reported that 20 BCF of gas was withdrawn from storage last week, compared to the market expectation of a 12 BCF withdrawal. Total storage now stands at 3.831 TCF, 8.7 percent above the 5-year average.
Natural gas futures typically rise into the winter months as gas-fired heating demand surges with colder weather. But high production across the U.S. combined with above-average temperatures pushed supplies to record levels. The situation has kept a lid on futures prices, which have traded near 10-year lows for this time of year.
Prices are expected to begin moving higher as winter weather sets in, but few expect a surge into next year.
In other energy news…This morning, ERCOT trades for this weekend’s and Monday’s peak hours went through in the upper $20’s while off peak trades went through in the mid $20’s. Peak load for this weekend is expected to be about 37,000 MW, and Monday is expected to be about 39,000 MW. For the next couple of weeks, high temperatures throughout most of ERCOT are forecast to be mainly in the 40’s and 50’s while occasionally reaching into the 60’s. Forward heat rates were fairly flat today.
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