Happy Wednesday
Well, the Henry Hub spot price was $1.21 USD/mm on Friday and $1.92 yesterday. Quite the jump. Before I put on my rally hat, I will say that there is a lot of space between $3.00 (December NYMEX last) and $1.92. By the time that the December contract expires in two weeks, those two prices must converge (or there is an arbitrage trading opportunity). So, either the Henry Hub spot price must come up or the NYMEX must come down. I don’t know which one will move, but the prices will converge.
Dawn does not have a futures contract associated with it, so it does not have the convergence imperative, but the same concept applies. The DDI jumped yesterday, but there is a lot of space between the DDI and the forward price that needs to be resolved.
The weather forecast is a bit warmer than yesterday, but I don’t think following the little changes is the way to look at this. The big picture is that cold weather is coming, and we are going to start withdrawing gas out of storage. The only question is when: does it begin this week or next week. The winter is forecast to be ‘warmer than average’ but that doesn’t mean you will be using your air conditioner.
Thursday’s EIA storage report for the week ending November 8th is forecast to be an injection of +49 bcf. After a long summer of below average injections, this would be the fourth week in a row of above average injections, and we currently have about 6% more gas in storage than normal for this time of year. We have enough gas in storage for this winter.
In the Caribbean Sea, there is a 90% chance of a named storm developing (if named, it will be Sara). So far, it is looking to move west and hit Honduras and Belize, Mexico. See below the chart from NOAA. Another model showed it possibly curving north east to hit Florida. We’ll keep a close eye on whether it moves into the Gulf Coast.
