Energy clients should be on the lookout for buying opportunities over the next couple of months as a big portion of the 2018-2019 winter is now in the rearview mirror. Near term futures prices have come off significantly from recent highs as the natural gas storage inventory deficit has shrunk. While the market was on edge heading into this winter for this reason, market participants are breathing easier now knowing that it would take extremely cold weather for a sustained period to upset the current price balance.
As we make the turn and head through the remaining part of this winter, the market is putting less risk premium on the potential for cold weather to significantly impact gas and electric power prices. The longer term fundamentals powered by continued gas production growth are driving prices. The storage deficit is 6% below last year at this time. Despite a sizeable storage withdrawal the previous week due to the cold weather throughout the Midwest and eastern states, the NYMEX 12 month strip continued to fall. Natural gas production increased steadily in 2018 and is currently almost 10 Bcf higher than it was at the beginning of last year.