The Energy Information Administration announced that we pulled a record amount of natural gas from storage last week, and though it was expected that they would announce a record withdrawal the size still surprised many. Though there was some uncertainty initially after the print, prices rallied off it through the remainder of the day. 

This came as cash prices rallied significantly in the face of another very strong shot of cold expected over the holiday weekend and through much of next week. 

Perhaps the most significant story of the day, however, was the way in which the curve rallied. It was clear that only weather expectations over the next month and storage concerns into the end of winter were spiking prices, as the rest of the natural gas strip was rather unconcerned about colder medium-term forecasts and a bullish EIA print. 

The result is that the G/H spread was sent to record levels for the time of year. 

These levels are comparable solely to the “polar vortex” of early 2014, yet flat price is significantly lower. Production appears to be responsible for much of that, which is one reason why later contracts along the strip were not as concerned about the massive drawdown announced by the EIA, as seen below. 

As has been the case for the last month, we continue to see a battle between short-term concerns over having enough gas to make it through the winter, and long-term complacency that production will be able to fill any shortage and fill storage back up in time for next winter.