The energy markets in November showcased a mix of bullish and bearish factors, driven by high storage levels, dynamic weather patterns, and fluctuating production levels. While natural gas inventories remained high, nearing full capacity for the winter season, shifts in weather forecasts and production data influenced market sentiment. January prompt month gained $0.16/MMBtu on the Friday after Thanksgiving, settling at $3.363/MMBtu, the strength in the January contract reflects market anticipation of peak winter heating demand possibly driving prices higher.
Below is a breakdown of the key bullish and bearish drivers for November:
Bear Factors:
– As of the week ending November 22, 2024, natural gas inventories in underground storage reached 3,967 Bcf (billion cubic feet). These levels are 267 Bcf above the five-year average and 134 Bcf higher compared to the same period last year. Healthy supply levels meeting seasonal demands will cushion upward pricing swings.
–– LNG exports this November averaged 13.3 Bcf/d, down from 14.6 Bcf/d during the same period last year. This decline suggests an increase in domestic supply, as less natural gas is being exported internationally.
Bull Factors:
– Power generation demand averaged 32.5 Bcf/d (billion cubic feet per day), up from 31.4 Bcf/d year-over-year. Higher power burn demand indicates strong utilization of natural gas for electricity and heating, which tightens supply and supports prices.
– Forecasts indicated colder-than-normal temperatures in the eastern U.S. and stormier conditions heading into December. Expectations of colder weather boost heating demand projections, supporting bullish sentiment in natural gas markets.
-Month-to-date production averaged 100.5 Bcf/d, a decline from 104.8 Bcf/d during the same period last year. A decrease in the production of natural gas can tighten supply as seasonal demand hits supporting prices.
Charts and graphs sourced from Constellation
