HardAssetsInvestor

Written by Sumit Roy  |

September 27, 2012

Natural Gas Hits New High For The Year Of $3.29 In Anticipation Of Winter Demand

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Can the rally in natural gas continue?

Natural gas prices rose after the Energy Information Administration reported that natural gas inventories totaled 3576 billion cubic feet at the end of last week, an increase of 80 bcf from the prior week. That was above analyst expectations that were calling for an injection in the low-to-mid 70’s.



The injection was well below the year-ago build of 111 bcf, but above the five-year average build of 75 bcf. In turn, the inventory surplus compared with the year-ago level dropped to 264 bcf, while the surplus compared with the five-year average rose to 295 bcf (calculated using a slightly different methodology than the EIA).





With only about eight weeks remaining in the injection season, traders’ attention is beginning to shift to the winter heating season. The year-over-year inventory surplus will be almost completely eliminated by November, a big turnaround from when the surplus reached a record near 900 bcf in March.

Still, the long-awaited decline in U.S. output remains elusive despite sharp cutbacks in investment and drilling activity by producers. Ever-increasing productivity has kept output largely flat despite a halving of the rig count since the beginning of the year.