Energies are trading higher - led by crude oil - as a wave of arrests of Saudi princes, ministers and key businessmen over the weekend has roiled markets - the arrests are part of a crackdown on corruption in Saudi Arabia led by the Crown Prince who ascended to that title 5 months ago (WSJ). Also, Yemeni rebels launched a rocket attack on Riyadh - the missiles were shot down before reaching the Saudi capital - the Yemeni rebels are supported by Iran (WSJ).
Adding to the bullish undertone is the notion of a possible default on bond payments/loans by Venezuela. Friday both the Fitch and S&P rating agencies lowered the debt ratings of Venezuela - a bond payment is due this Friday (Nov 10) which will help determine whether President Maduro's is serious about his call for debt renegotiations (Bloomberg).
The majority of winter weather forecasts have been predicting there will be a La Nina weather pattern, but there still is no confidence in the exact effect this will have. US production has been sustaining its upward trend as the Rover pipeline is providing more takeaway capacity. On Saturday, production hit a new all-time high of 76.1 Bcf/d.The increase in heating demand for natural gas is expected to reflect in the storage report this week. For the close of October, should the report be in line with the five-year average injection, would be the lowest inventory level reported since 2014. (Direct Energy)
Friday Baker Hughes reported that the NG rig count fell by 3 units.
Current natural gas storage levels remain behind both the year-over-year average (-4.6%) as well as the 5 year average (-1.1). As stated above, it is likely we will head into winter with the lowest inventory levels since 2014.
That said, Old man winter has some catching up to do. Although it’s early, heating load is off to a slow start. New York City for the first five days of November at 39 HDD, far short of the pace to get to a normal November of 519 HDD. Chicago is at 78 HDD, and the monthly avg for November is 707 HDD. There is still a high level of uncertainty about if the colder weather will be sustainable (Spark Energy)
The December 2017 Nymex natural gas contract is up 8c to $3.065 this morning on the back of colder weather changes in the near term forecast. However the 11-15 day forecast shows a return to warmer temperatures on the East Coast, so the market could be choppy over the next week. US dry gas production is at record levels approaching 76 bcf per day and keeping the market well supplied as we head into winter. (GreatEastern Energy)
Forward markets gained a considerable amount in the last week and continuing it’s rally this morning. Largely due to the increased short-term cold forecast changed late last week, it will be interesting to see if this dynamic continues toward the end of November. If so, we can expect winter pricing to continue making impressive gains for the remainder of winter. Given recent volatility, any warmer signals can equally send prices downward as quickly. As with most periods leading up to winter, timing is essential in the next few weeks to lock in a good winter opportunity. (GreatEastern Energy)