The unstoppable natural gas rally continues, even finding a way to hit another gear in today's session, as prompt month prices soared more than 30 cents, even touching the $5.00 level a couple of times.
 

This was the highest level prompt month has traded since February 2014, in the midst of the infamous "polar vortex" winter.

What was the driver of today's rally? We have discussed previously the supply problem we have in the current natural gas market, and this has only been exacerbated in the wake of Hurricane Ida, as it appears Gulf of Mexico production may be offline much longer than originally anticipated. While there is not nearly as much production out of the Gulf as there once was, in this environment, every bcf counts as we march toward the winter season. With this reduced production, we are producing *less* now than we were producing in the wake of the February freeze.
 

Data courtesy of Criterion Research, LLC.

As seen, we are now under last year's production levels, and well under 2019's levels.

Of course, this is only part of the fundamentals story. With increased exports, total supply (production + imports - exports) has been running significantly under levels from the last couple of years.
 

This data also courtesy of Criterion Research, LLC.

Simply put, this is unsustainable, as, when accounting for demand as well, it puts us on a path toward end-of-season storage levels under 3.5 tcf, well under the 5-year average, which is rather precarious, heading into winter with such a supply deficit.
 

Speaking of demand, weather, of course, is a key component, and forecasts have warmed solidly over the last week or so, with projected demand over the next 15 days running above normal levels, measured by Gas-Weighted Degree Days (GWDDs).
 

Now, we are inching closer to the time when warmth becomes bearish, as orange / red maps in three to four weeks will mean below normal demand, but we are not quite there yet. Needless to say, once to the winter months, weather's importance in the natural gas market will be even more elevated than usual, as the difference for natural gas prices between a warm and cold winter can be measured in dollars with this fundamental backdrop.