Is the tank dry?
The storage chart shows the aggregate of natural gas in underground storage caverns. The red line is this year and the grey band is that range for the past seven years. We entered the gas year (Nov-Oct) at a level above the previous maximum and, because of a warm November and December, stayed above that level until January. That's when the fun began.
This spring has been cooler than last year and, as expected, that drove gas out of storage. It also drove up the price of natural gas by almost a dollar. This despite the fact that we are still comfortably in the middle of the range and production is growing. What does this really tell us? That the market is sensitive and volatile and that the volatility is biased to the upside.
A bold claim? Not really. When storage was WELL ABOVE that seven year high prices did not plummet. They went up a bit as we entered winter just like we all expect. As soon as storage is not at peak levels, but is still at reasonable and comfortable levels, prices react quickly. Too quickly say some. After all, storage will be refilled again by winter and this is exactly the role storage should play. It provides the cushion for higher winter usage to make sure natural gas is there when we need it and to prevent wild price oscillations driven by lack of supply.
To our mind, the market reaction of increased prices to a normal use of storage gas says only one thing: there is a bias and the bias exists to make some people money. When this happens, consumers lose.