Let’s Talk Weather (Or Lack Thereof) and Its Effects

By: Mike Dombroski / November 17, 2016

This winter’s start is eerily similar to last year: it has been unseasonably warm. This has been disastrous to the natural gas market and the effects will soon be felt by the heating oil industry as well.

From the start of October this year until November 16th, three highly populated heating markets have seen temperatures far warmer than their 10 year averages. Boston, Chicago, and Philadelphia have been 4%, 13%, and 5% warmer than average, respectively. These markets primarily use natural gas for heating, and that commodity’s price has been bashed over the past month. December NYMEX Henry Hub Natural Gas futures have fallen 24% since October 10th, with futures currently trading around $2.70/dk (dekatherm). This comes as storage in the ground has ballooned to 4.047 tcf (trillion cubic feet), surpassing last year’s level for the same week, 3.996 tcf. Some traders have given up on this winter and are concerned stocks could exceed storage capacity in 2017.

This fear of stocks swelling is also evident in the heating oil industry. Current distillate fuel oil stocks stand at 148.9 MMbs, higher than last year’s level of 140.3 MMbs. Bear in mind, the prompt month NYMEX ULSD contract fell from a high of $1.5812 last year on November 4th to $1.0709 on December 31st. Last year we had a warm start to the winter, a glut of heating oil stocks, and no OPEC production cut. The current NOAA 8 – 14 day forecast predicts temperatures will be cooler-than-average along the east coast. These forecasts will need to be more consistent, otherwise this winter could be shaping up to be just like last year with decreasing prices as the result. December ULSD currently trades at $1.4604/gallon.  

 

11-16-16 NOAA 8 to 14 day forecast.gif

 

11-16-16 settle.jpg

 


Mike Dombroski

Written by

Mike Dombroski


Guttman Energy Daily Market Update Disclaimer – The information contained in this market update is derived from sources believed to be reliable; however this update could include technical inaccuracies or typographical errors and Guttman Energy does not guarantee the accuracy, completeness or reliability of this update. FURTHERMORE, THIS UPDATE IS PROVIDED "AS IS," WHERE IS, WITH ALL FAULTS AND WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY. GUTTMAN ENERGY ALSO SPECIFICALLY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES. YOU USE THIS UPDATE AT YOUR SOLE RISK. This update and any view or comment expressed herein are provided for informational purposes only and should not be interpreted in any way as recommendation or inducement to buy or sell products, commodity futures or options contracts.


Comments

Subscribe to our blog

Price Feed

Stay up-to-date on current fuel prices and market trends with our NYMEX price feed (15 minute delay to the live market).

© 2018 Market data provided and hosted by Barchart Market Data Solutions. Fundamental company data provided by Morningstar and Zacks Investment Research. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer.

Categories

Contact Us