A cold week in early November especially for the South, Northeast and West has put the country on notice for the coming winter heating season. With that said, the general mood is very positive for reliability and pricing this winter heating season: natural gas dry production is at record levels, even though more drilling resources are being directed toward oil; storage levels entering the winter heating season will likely peak at more than 3.8 Tcf in 2011 – settling at or above record levels; and yes, while pipeline imports and LNG sendout are down year-over-year, sufficient available capacity remains to meet a weather-driven spike in demand (constraints on transportation infrastructure notwithstanding).
All of this indicates a robust supply picture going forward, even with total natural gas demand about 2.8 percent ahead of last year at this time. On the flip side of the supply coin, domestic production increases have flattened forward price curves, which may dampen new storage construction as investors normally rely upon sufficient seasonal price spreads to signal market and arbitrage opportunities. This trend is likely to develop over the longerterm,to be sure, but as has been said so many times before: it’s always something.
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