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Early November provided us with our first real cold shot of the withdrawal season, pushing natural gas prices above the $3.20 mark for the first time since late May. This spike was short-lived, however, as a very warm Thanksgiving weekend and updated short-term weather outlooks called for above average temperatures in the days that followed. Enter the final week of November and we were right back to looking at near-$3.20 prices in response to a complete flip in the 8-14 day outlook. There was some speculative price movement related to anti-Russian measures within the EU that could have possibly constricted the flow of natural gas in Europe, placing short-lived upward price pressure on the value of U.S. natural gas products. The third draw of the season came in at -33 Bcf; largely in line with market expectations and less than the historical average.

While the spread between the ceiling of $3.25 and floor of $2.80 is not vast, the day-over-day volatility we are experiencing is in large degree a result of competing and uncertain winter weather predictions, while traders and wholesalers lean on short-term outlooks to formulate demand expectations for Jan-Feb. Natural gas production continues to set all-time highs (75.9 Bcf/d week ending Nov. 15), a bevy of new pipeline development is on the horizon, and LNG exports continue to experience significant margin on deliveries to China and South Korea.

A weak La Niña forecast is still hanging around, typically resulting in warmer and wetter weather in the northeast, and colder weather in the upper-Midwest. A normal or cold winter could certainly introduce significant volatility into a market that has been tempered by sluggish storage numbers rescued by recent warm winters. Power prices have predictably mirrored natural gas price movement in November – somewhat volatile with limited upside outside of the prompt trading months.

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