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The November wholesale exchange contract was lower yesterday by $0.025 as warm temperatures are being forecasted this week before a brief cold snap occurs in the Northeast and Southeast in the 6-10 day outlooks while the 11-15 day outlooks are being favored to be slightly above normal. The storage levels are currently 3,624 bcf which is only 216 bcf from the all time high and current estimates for this week are in the mid to high 70’s bcf area. This warm view by some to start the heating season (November through March) has been weighing on the natural gas market even though meteorologist’s are forecasting a colder than normal heating season. The colder than normal temperatures that meteorologists are forecasting should commence in mid November and continue through February. In the international markets, the Euro zone meeting will occur tomorrow and recapitalization is on everyone’s mind. Some plans are to forgive some of Greek’s debts are on the table and also some form of a recapitalization plan upwards of 100 billion euro’s. Only time will tell if the package will succeed in calming our domestic markets and international markets as well.
In the wholesale natural gas market, the average of the first 12 months of New York Mercantile Exchange natural gas wholesale contracts slid to its lowest in nine years on Monday as growing supplies and moderate weather weighed on the natural gas complex. The 12-month futures strip fell 2.3 cents to settle at $3.923 per million British thermal units, the lowest strip settle since Nov. 15, 2002, when the average closed at $3.926, Reuters data showed. Despite record heat this summer that drove NYMEX front-month gas to its 2011 peak near $5, record-high gas production, primarily from shale, has been the main factor pressuring price expectations. The U.S. Energy Information Administration expects marketed gas output this year to climb more than 4 billion cubic feet per day to a record-high 65.99 bcf daily, eclipsing the previous high of 62.05 bcf from 1973. The EIA expects another 2 percent rise in production next year with consumption again lagging; dimming chances that the overall supply-demand balances will tighten soon.
Drilling data on Friday from Baker Hughes also offered little hope of a production slowdown, with the count at 927 still well above 800, a level some analysts say is needed to cut output and tighten supplies. A mild autumn only added to the recent price pressure, as cooling demand faded and temperatures held at levels too mild to stir much heating load. The result has been several triple-digit weekly inventory builds over the last month that forced analysts to raise estimates of where inventories will peak this year. Most now expect storage to climb to near 3.8 trillion cubic feet, just shy of last year's record high of 3.84 tcf. Most analysts do not expect the market to tighten until later next year, as low prices steadily lift demand and finally force producers to slow drilling. The 12-month strip peaked this year in early June at $5.059, a 10-month high. The strip hit an all-time high of $13.334 in July 2008.
On the weather front, for the second year in a row, a La Nina event which is defined as a cooling of ocean surface temperatures off the western coast of South America will influence winter weather patterns across the United States, while the less predictable Arctic Oscillation (according to Weather for Dummies, is an index of the dominant pattern of non-seasonal sea level pressure variations north of 20N latitude, and it is characterized by pressure anomalies of one sign in the Arctic with the opposite anomalies centered about 37-45N according to the National Oceanic and Atmospheric Administration (NOAA) and could produce "dramatic" swings in winter temperatures. Those weather events make it likely that the Southern Plains will continue to see drier and warmer-than-average weather, while the Pacific Northwest will be colder and wetter than average during December, January and February, NOAA said. Colder-than-average temperatures are also expected in California, the Northern Plains and the Great Lakes. The Northeast, Mid-Atlantic, Ohio and Tennessee valleys, Florida and the south Atlantic Coast, on the other hand, have equal chances for above-, near- or below-normal temperatures this winter, NOAA said. Winter weather for the Northeast and Mid-Atlantic regions is often driven not by La Nina but by the Arctic Oscillation, which is always present and fluctuates between positive and negative phases.
Forecasters at AccuWeather.com have said they expect the La Nina event to prompt especially harsh temperatures and snowfall across the Midwest and Great Lakes region, while the Northeast can expect winter 2011-2012 to be somewhat less extreme than last year and Weather Services International (WSI) recently said it expects the northern and eastern United States to experience cooler-than-normal temperatures through December. The newly emerging La Nina event and a trend toward North Atlantic atmospheric blocking indicate below-normal temperatures becoming more common in the eastern U.S. in November and across all of the northern U.S. by December, according to WSI.
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