A brutal cold start of the year has been followed by moderate temperatures across the country. Natural gas prices have risen significantly since early January 2014, as inventories were being depleted at a faster than normal rate due to higher than normal heating demand. Nevertheless, record production and tepid demand after the spring months triggered a massive selloff in mid-June 2014, with the front month losing more than 20 percent to date. Early concerns of tight supply conditions ahead of the next heating season have eased due to weekly record or near-record injections. Electricity prices have also plunged not only because of the recent drop in natural gas prices, but also because of a drop in heat rates. In Texas, peak load had not been this low in June and July since 2010. Low electricity demand has depressed spot and forward heat rates.
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Besides an uneventful 2013 hurricane season, which “technically” ends on November 30, the natural gas injection season is also coming to an end. According to the Energy Information Administration (EIA) storage injection report released on November 7, 2013, natural gas inventories are 1.5% above the five-year average. The latest near-term weather forecasts suggest that the gap will increase during the next two or three weeks. In other words, according to the EIA, there should be sufficient natural gas in storage to meet the projected natural gas heating demand for the upcoming winter.