From a high volatility of 125% on February 25 US natural gas futures volatility has declined to 27.6% - a pointer that climate is moderating and temperatures are rising which can act as a negative factor for prices.Angel Commodities in a special report on Natural gas pointed out that April marks the beginning of natural gas injection season, with working inventories in storage at their lowest level since 2003 at 822 Bcf as of March 28. 2014. The Energy Information Administration (EIA) report suggests robust injection is going to happen this season starting April as higher prices reduce the natural gas power burn this year compared to 2012 and 2013.

Although this injection season starting April to October, started on a slow note, prodcuers of natural gas have more time to refill their inventories and looking at the history, the injections of natural gas into inventories every year April to October has been more than 45%.

Also, EIA expects relatively high gas production growth and moderate demand growth starting in April that will allow for a record storage build through October. The forecasted electric power consumption of gas from April to October is 23.9 bcfd, essentially flat compared with a year ago. Expected dry natural gas production during this period is estimated to reach 68.1 bcfd, up 2% from last year.

If the same trend continues this season and injections happen as per EIA’s expectations, the natural gas prices on the NYMEX (CMP: $4.473/MMBTU) can head towards $3.8 by September 2014 while on the MCX price can go down towards Rs.220 /MMBTu for the same time frame,according to Angel Commodities.

Natural gas markets entered January 2014 with low storage levels, following heavy withdrawals at the end of 2013. In January 2014, Lower 48 working inventories fell to a 10-year low, as freezing temperatures led to record natural gas demand and storage withdrawals. Significant inventory draw-downs continued into February 2014, further tightening the balance between natural gas supply and demand and leading to increased natural gas spot price volatility, before relatively less severe temperatures in March brought spot price volatility back to pre-winter levels.
Source: Angel Commodities