North America gas markets short-term outlook: Fall back

Henry Hub gas prices have already started their fall back, retreating from the $6.50/mmbtu highs seen over the past month. Near record October warmth has delayed meaningful heating loads, and this warmth looks to continue into November, leading to our projection that Lower 48 working gas storage will fill to about 97% of the five-year average before the start of winter. The market’s structural changes from last year are evident, though; both supply and demand are not responding to prices like they once did. • Production growth continues but pales in comparison to past years due to continued capital discipline • Gas burns have been relatively inelastic, even at high prices This means that even under a normal winter, storage levels may draw down faster than we’ve seen in the past, and the situation may be even more extreme with a cold weather event.