NYMEX Drops to 13-Month Low

The NYMEX December gas futures contract dropped another 6 cents on Wednesday settling at 3.344/MMBtu, the lowest a prompt month contract has settled on a given day in 13 months.

According to PFGBest analyst Phil Flynn, the downturn is most likely attributable to the mild weather throughout November, in addition to a spread trade between lower gas and higher oil prices.

Currently, the December gas futures contract is trading $0.04 higher at $3.38. By comparison, the 12 month strip is trading at $3.62/MMBtu and this year's winter strip (Dec 11 - Mar 12) is trading at $3.49/MMBtu.

Storage Levels at an All-Time High

Working gas in storage was 3.85 Tcf (3,850 Bcf) as of Friday, November 11, 2011. This indicates a net injection of 19 Bcf from the previous week.

Analysts were anticipating a slightly higher injection of between 23 and 27 Bcf this week, but regardless, there is now more gas in storage than the all-time high of 3.84 Tcf. 

This also indicates that storage levels are beginning to approach the demonstrated peak capacity of 4.1 Tcf (4,103 Bcf). Demonstrated peak capacity is a rather conservative measure however, and there is likely more potential capacity than 4.1 Tcf.

Weather Update 

With the winter months approaching, reaching peak demonstrated capacity should be of no concern as storage will soon begin decreasing with the dramatic seasonal increase in demand.

Some parts of the southern tier of Western New York and Northeastern Pennsylvania could see up to 4 or 5 inches of snow over the next 48 hours.