While natural gas and West Texas Intermediate (WTI) crude prices were down for the week of Nov. 4, there were some positives to take away as the week drew to a close. Natural gas prices rallied, and several NGL prices showed strength.

Gas prices rallied from sub-$2 per million Btu (/MMBtu) levels to just under $2.40/MMBtu as the week, which was fueled by increased heating demand, ended. There isn’t much room for a significant rally as this season’s temperatures are expected to be much warmer than they were last winter. With this in mind, the arrival of cooler temperatures is much needed and appreciated by the gas markets.

WTI crude prices fell below the $42 per barrel (/bbl) threshold and there are concerns from several traders and industry analysts that prices could fall below $40/bbl before the year ends. It will take a significant amount of time to work off the supply overhang currently taking place in the market.

Heavy NGL prices were stronger than WTI crude as butane benefits from increased use in winter-grade gasoline blending. Butane rose 6% to 64 cents per gallon (/gal) at Mont Belvieu, its second-highest price since early spring. The Conway price improved 8% to 62 cents/gal, the highest price at the hub in a month. Isobutane prices were also supported by the demand for butane as they improved 11% to 69 cents/gal at Conway and 8% to 65 cents/gal at Mont Belvieu.

The biggest surprise for NGL prices this week was easily the gains posted by propane at both hubs. Traders we spoke to indicated that these gains were supported by strong LPG export levels, but the rising storage levels for propane, which were more than 100 million bbl, indicates that there is likely to be a severely challenged market. A warmer-than-normal winter is likely to continue to increase storage levels to record-setting levels throughout the next year.

Natural gas storage is also at very high levels as they are currently at more than 90% of working gas capacity and nearly 85% of working gas design capacity. The good news is that storage injections have slowed in the past few weeks, though the injection season is still dragging along more than it should have by now and creating challenges, according to Barclays Capital.

“Even though winter typically gives the market some steam on which to rally, a number of bearish factors are limiting the bullish excitement this year. High inventory levels, continued production increases in the face of low prices and the threat of a mild winter have limited winter price expectations,” the investment firm said in a Nov. 9 research report.

Storage levels are approaching 4 trillion cubic feet (Tcf), which will be a nearly impossible overhang to work off in a cold winter, much less the warmer season being forecast. According to the U.S. Energy Information Administration, storage increased by 49 billion cubic feet to 3.978 Tcf the week of Nov. 6 from 3.929 Tcf the prior week. This was 10% greater than the 3.605 Tcf posted last year at the same time and 5% greater than the five-year average of 3.805 Tcf. Injections should continue in the next week as the National Weather service is anticipating warmer-than-normal temperatures throughout the Eastern half of the country.