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In the near term, the December weather forecast is currently showing 3% warmer-than-normal heating degree days, while production has not shown any signs of declines. At the same time, more nuclear generation is likely..

01 Dec 2012

Commodity Online
Natural Gas December contract rolled off the board at $3.70/MMBtu. January contract prices are likely to stay range bound for the time being, with very little support from weather or any incremental fundamental changes in supply.

In the near term, the December weather forecast is currently showing 3% warmer-than-normal heating degree days, while production has not shown any signs of declines. At the same time, more nuclear generation is likely to return in December.

Although higher y/y nuclear outages are likely to lend support to gas burn still, the m/m reduction in nuclear outage is likely to take away more than 1 Bcf/d of demand for gas if we assume gas is the only fuel that benefits from the nuclear shortfall.

The market is expecting a storage withdrawal of about 8 Bcf/d for the week ending 23 November, much lower than the previous two weeks.

For the week in reference, HDDs are 13% lower than the previous week and 10% lower than the same time last year. Power burn remains supported by much higher y/y nuclear outages (1.7 Bcf/d gas equivalent) despite lower y/y coal displacement.

Production remains elevated by about 1 Bcf/d y/y, according to Bentek data.

The UK gas market remains well supported with prices for Jan ‘13 gas at 67 ptherm. Storage issues have largely been offset by expectations of milder weather. We expect prices to just be sensitive to the weather for the coming weeks but range-bound trading around current levels.


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