Another week, another weekly storage report that comes in just…slightly…below…the expected level. And the gains in NYMEX pricing that jumped off of last week’s report appear to be holding.
It appears that, in the absence of any other consistent predictor, the natural gas market has found its bellwether, and it is the weekly storage report. And it appears that the signs it is choosing to see from this bellwether is that the drop in rig count and production has finally caught up with the oversupply of natural gas on the market.
Would a large injection next week puncture this? Based on the year so far, probably. It is perilous business to base your investment strategy on a single marker. But this appears to be the course the natural gas market has taken, and as a natural gas consumer, this is the price reality you face. A market that has always been notable for its week-to-week volatility now rises like a shot of drops off a cliff at 10:31am EST every Thursday. Two or three Bcf in the report is apparently enough to shift the market by 15-20% in a matter of hours.
Meanwhile, on the sidelines, there sits the United States Natural Gas ETF, which we have discussed in several previous posts. This fund is getting a lot more attention in the business press these days. About time for that. The fund is currently tied up in hearings with SEC as to whether it can issue more shares…at the moment, it has no more to sell, which has minimized its impact on the market for the past few weeks. Market price dropped sharply when this happened. If the new shares are approved, the results should be easy to guess.
Which means that by this time next week, NYMEX could be back down in the $3.20 range, which is where many experts believe it belongs, or pushing back up above $4.00. An awful lot of this will apparently hinge on a few Bcf of injection.
What does this mean to you? As an energy consumer, your message hasn’t changed. A NYMEX that rises and falls with a speed that would impress the riders in the Tour de France, and that triggers itself off of signals that once were only part of a bigger picture, is no place for your energy budget. Cost Containment Intl. looks for a longer path and a straighter course. Save your bike riding for the weekends.