WaveStrength Material Profits for November 30, 2006
EIA Natural Gas Update
by Sara Nunnally
The latest update has just been released by the Energy Information Administration.
Here’s the breakdown…
Spot prices increased for the past week, despite today’s slip of 10 cents or so. The reason for this slip is natural gas stores. Apparently, they are still 7.2% above five-year averages even though we experienced a decrease this past week.
The update does say that this latest decrease was the smallest decrease we’ve seen since December 30, 2005. Here’s the thing, though: This draw is the third largest since the heating season started four weeks ago. That means we’ve started using natural gas earlier this year, which could explain the nice comeback we’ve seen in natural gas prices.
But higher temperatures have limited the amount of natural gas we consumed. According to the National Oceanic and Atmospheric Agency, temperatures were 7% above normal, and the southern states were between 12–34% higher than normal.
I think that’s all about to change as severe weather is expected to whip through the whole Midwest from Dallas to the Great Lakes. There’s even a rare blizzard warning for Oklahoma.
The weather could get so bad that the Dallas-Fort Worth airport could cancel 200 flights.
I’m sure you’ve all seen the way Washington has been affected by all the snow they’ve received lately. Winter is only just beginning.
And quick cold snaps could wipe out our natural gas stores. As it is, our stores only have 3.4 trillion cubic feet, enough for just over two months, and that’s based on September’s consumption, which is significantly lower than previous summer months.
Summer months normally have lower consumption than winter months, which further supports the idea that a couple cold snaps could dwindle our natural gas stores very quickly.
I expect natural gas prices to resume their rise through December. The coldest months are yet to come.
Our natural gas plays are doing well despite this slight down day, and an old favorite of ours is back up to our old exit point. National Fuel Gas Co. (NFG:NYSE) has climbed 3% in as many days.
NFG bounced well off its 50-day Moving Average, which also coincides with the 50% Fibonacci retracement line.
I think you’ll see NFG testing its recent high of $39.10 in the next five to seven days.