Leading up to today's EIA Natural Gas Storage report, Natural gas prices retreated for a second-straight session on Wednesday, with analysts saying a recent rally had been so strong that there is cause to become cautious. The market is still up 26% in two months, in a rally that pushed prices to a 22-month high earlier this week.
See a recap of previous weeks EIA storage reports here.
Many people have been counting on a combination of winter heating demand and lower drilling activity to lead to higher prices. Analysts, however, warned production could still ramp up quickly and that it is too early to know if winter would be colder than normal.
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Natural-gas wholesale contracts for November delivery lost 2.7 cents, or 0.8%, at $3.21 a million British thermal units on the New York Mercantile Exchange. The price has fallen 2% over two sessions.
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Natural gas traders have been betting on big gains, as Nymex gas recovers from its historical inflation-adjusted low hit earlier this year. Relatively low shale-gas prices have pushed power plants to record-high consumption, though they have led drillers to reduce the number of working rigs in the U.S. to less than 100, lowest in the history of Baker Hughes Inc.’s rig counts.
Still, shale drillers are notorious for ramping up output quickly and exceeding expectations. And storage levels remain buoyant from a glut leftover from last winter that they could enter this winter at a record high. That situation could cause prices to fall if there isn’t enough cold to spur strong demand for heat and power. And it limits how far rallies can go, probably until weather reports have more definitive updates on the coming winter, a research manager.
See a recap of previous weeks EIA storage reports here.
EIA Natural Gas Storage Report 10-13-16
Working gas in storage was 3,759 Bcf as of Friday, October 7, 2016, according to EIA estimates. This represents a net increase of 79 Bcf from the previous week. Stocks were 56 Bcf higher than last year at this time and 192 Bcf above the five-year average of 3,567 Bcf. At 3,759 Bcf, total working gas is above the five-year historical range.
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Analysts expected the report to show a build of 88 Bcf. As of 10:32 ET, natural gas futures were trading higher by 2.6% to $3.292.
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Recap of previous weeks EIA Natural Gas inventory Reports.
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