October’s early start to winter saw subfreezing temperatures and snow across the upper Midwest. Prices for natural gas have been trading sideways in the $3.00 to $3.30 range despite all lingering uncertainty due to COVID-19 recovery.
EIA’s natural gas stocks report saw its first decline in the week leading into Halloween but managed a nominal injection of 8 billion cubic feet (bcf) in the first week of November. That brings total gas in underground storage to 3,927 bcf, roughly 5 percent above both last year and the five-year average.
Unusually warm temperatures arrived across most of the U.S. in early November, favoring the small build seen. This may be the last bump we see for some time, however. The market remains in backwardation, and we are now entering the start of the seasonal drawdown cycle and winter heating demand that should prevail through spring.
Cheaper natural gas prices have led to a dramatic reduction in the number of active rigs across the U.S. After falling by almost half since the start of this year, the market appears to be stabilizing, and rig counts have been flat the last few months.
News of a potential Pfizer vaccine with 90 percent effectiveness buoyed the markets and lifted crude oil prices to their highest levels since August—before profit taking and concerns of rising infection rates halted the rally. Clearly, it will take many more months before enough vaccines can be manufactured and rolled out around the world to deal with the pandemic.
Meanwhile, Russia and Saudi Arabia are continuing to discuss production cuts to boost prices in response to decreased global demand.
The key fundamentals to watch for natural gas moving forward will be active rig counts, export flows of pipeline gas and LNG to Mexico and Canada, and how harsh a winter we see across the U.S., along with monitoring inventory levels.