It is becoming increasingly obvious that whenever winter temperatures arrive they will most likely be too little and too late to save a plunging market. For the oil and gas industry, 2015 has been a lost year with low prices, high storage levels across liquids, gas and crude oil products.

Positive news is hard to come by with the brightest item being that the crude oil market could be rebalanced next year, according to Simmons Energy Research. “Although the market remains heavily oversupplied through the first-half of 2016 and inventories are at record levels, on reasonable assumptions, the market looks balanced by the second half of 2016 and increasingly tight in 2017 and beyond,” the firm said in a Nov.19 research note.

The report stated that this rebalancing in this timeframe is a possibility and not a given as there are multiple factors that could delay this return to optimal supply-and-demand levels. These potential challenges include incremental OPEC production and global economic and oil demand uncertainty.

Should the oil market rebalance in 2016, it could be short-lived with the possibility of a sharp increase in value due to reduced production. “Massive industry layoffs and the reduction in inventory of working drilling rigs will contribute to a slow recovery in activity once oil prices start to rebound in 2016,” Barclays Capital reported in a Nov.16 research note.

The investment firm reported that approximately 200,000 oil and gas jobs have been lost on a global basis with many drilling rigs scrapped. This is likely to lead to reduced borrowing power and drilling activity while financial institutions and producers gauge the market’s ability to sustain these expected price improvements.

West Texas Intermediate (WTI) prices will have to experience notable gains in the coming year to experience increased drilling activity as most traders and analysts believe that the lowest price to support drilling is $60 per barrel (/bbl). This is a far cry from the $40/bbl currently being experienced.

Natural gas prices experienced gains, though they are more indicative of slight corrections following severe declines in recent weeks than any sort of rally. Prices rose just above $2 per million Btu, which is on the low end of the price curve for the past six months. Given the weather forecasts for the coming weeks it is hard to see much more value being added to prices before December.

These weather forecasts have been especially troublesome for propane, which continues to experience record storage levels despite strong LPG export demand. The lack of heating and crop-drying demand has made it hard to stop the storage build much less work off this overhang. More troublesome is the possibility that LPG export demand could begin to slow down from Asia based on futures prices.

Propane had the lowest price decrease at both hubs this week with an 8% decline to 41 cents per gallon (/gal) at Mont Belvieu and a 10% decline at Conway to 38 cents/gal. Though margins remain solid at both hubs, it is likely that if storage levels are at record lows come the spring that prices will drop lower and create much thinner margins.

Overall margins fell for every NGL at both Mont Belvieu and Conway as NGL prices failed to follow the improvement in gas prices. The most profitable NGL to make at both hubs was C5+ at 73 cents/gal at Conway and 75 cents/gal at Mont Belvieu. This was followed, in order, by isobutane at 47 cents/gal at Conway and 41 cents/gal at Mont Belvieu; butane at 38 cents/gal at Conway and 39 cents/gal at Mont Belvieu; propane at 19 cents/gal at Conway and 22 cents/gal at Mont Belvieu; and ethane at nil at Conway and 3 cents/gal at Mont Belvieu.

Gas storage injection rates finally slowed down the week of Nov. 13 with the U.S. Energy Information Administration reporting that storage increased by 15 billion cubic feet to 4 trillion cubic feet (Tcf) from 3.985 Tcf. This was 11% greater than the 3.596 Tcf figure posted last year at the same time and 6% greater than the five-year average of 3.793 Tcf.

Heating demand is expected to remain mixed as the National Weather Service’s forecast for the week of November 25 anticipates warmer-than-normal temperatures in the eastern half of the country and cooler temperatures in the western half.

Frank Nieto can be reached at fnieto@hartenergy.com.