Although the prompt contract finished flat ahead of the weekend, the back of the curve mostly edged higher. The March 2012 contract closed again at $2.48/MMBtu. The balance of calendar 2012 added three cents, to $2.97, while calendar 2013 increased six cents, to $3.74.
The weather outlook ahead of the weekend was largely unchanged, with some extremely cold weather coming our way in the next five days. Nevertheless, the forecast also indicates that the bouts of cold air should not change the expectation that February will be a largely warm month.
Clearly, the storage overhang will be difficult to work off with this kind of weather expectations. On the supply side, the natural gas-directed rig count came off another 25 rigs, to 720, this week.
We will continue to monitor the downward trend of gas-directed rig count closely and believe it will need to stay consistently below 700 for quite some time to affect production negatively. Cash prices mostly pushed up on the day. Henry Hub added one cent, to $2.51. Socal Border edged lower by three cents, to $2.70. Transco-Z6 (NY) surged $2.70, to $5.61, in anticipation of the short-term cold spell in the Northeast.
Courtesy: Barclays Capital
