If you bet on natural gas, you bet on the weather. You also bet on fundamental factors, like market manipulation and the limitless availability of money from yield-chasing investors whose billions fund years of over-drilling, which then crushes prices – and the financial models of these wells. Billions in mal-investment get written off.

You also bet on long-term demand and supply, both of which are impacted by the price of natural gas. Given the low price over the last few years, demand has been picking up. Power generators switched from coal to natural gas. Global industrial companies built plants in the US for energy-intensive processes. Chemical companies built plants that use natural gas as feed stock. Because in the US, gas has been far cheaper than anywhere else in the developed world.

Folks on the East Coast, in places like New York City, who had limited supply of natural gas due to pipeline constraints, and therefore used heating oil to keep their homes cozy – they’re connected as of this fall via a growing network of pipelines to Pennsylvania’s prolific Marcellus shale formation. Exports to Mexico via new pipelines are creeping from one record high to the next. And natural gas in transportation is picking up too.

All this has been pushing up demand, but very gradually. It’s like watching paint dry.

In the US, natural gas is still dirt cheap. Japan is paying over $18 per million British thermal units (MMBtu) on the world market for LNG. At the Henry hub, natural gas goes for $4.37 per MMBtu at the moment.

But natural gas can get very expensive in a hurry in the US. The Henry hub is just one place where natural gas is traded. It’s the connecting point in Louisiana of 16 intra- and interstate pipeline systems that transport natural gas from the region’s ample gas deposits to other parts of the country. But in areas that are not well-served by pipelines, such as Boston, prices tend to spike at local trading hubs during times of peak demand, and they can briefly exceed $50 per MMBtu! That’s what natural gas is worth when it’s in short supply.

During heating season, natural gas demand far outpaces production. Hence our reliance on vast underground storage systems across the country. The quantity drawn from storage and the quantity left in storage every week are critical data points.

And today, we were served a doozie by the Energy Information Administration: 287 billion cubic feet (Bcf) of gas were drawn from underground storage during the week ending January 10, the highest rate ever, beating the prior record of 285 Bcf set in late December. Storage levels dropped to 2,530 Bcf. That’s 14.9% below the 5-year average for this week and 20.7% below last year at this time. It’s not much of a cushion: less than 4 weeks’ supply in the winter.

Storage levels are now 6.7% below the five-year minimum for the week! The last time it was this low was in 2005. For the week ending January 14 that year, storage was down to 2,500 Bcf. But it’s not comparable.

In 2005, the US consumed 22,014 Bcf of natural gas. In 2013, it consumed an estimated 26,100 Bcf (actual values are available only through Oct.). That’s an increase in annual consumption of 18.6%.

What happened in 2005? Early in the year, prices ranged from $12 to $14 per MMBtu and hit an all-time high of $15.40 in December. This year, consumption may be 20% higher than in 2005. The margin of safety that natural gas in storage represents hasn’t been this tight in many years.

Based on the smart people that predict the weather, the above average drawdown might continue. Storage levels reach their low point at the end of March or early April, after which excess production will start refilling the storage systems. This year, unless unseasonably warm weather starts smiling on the country pretty soon, storage levels may hit lows not seen in more than a decade – while consumption may be 20% higher. Then the question will be if storage facilities can be refilled fast enough to get us through the next winter with a reasonable margin of safety.

“Storage levels will be stretched a little bit, but we still have plenty of gas in the ground and panic hasn’t ensued just yet,” Kent Bayazitoglu, director of market analytics at Gelber & Associates in Houston, told the Wall Street Journal.

That sums it up: the word “panic” has appeared on the horizon but is too distant to contemplate in detail. The US won’t run out of natural gas. The world markets can supply all we need, but not at current prices. In the worst case scenario, we’d have to compete for brief periods with Japan and Korea for LNG. It would cause prices in the US to spike – and traders to salivate. But even the mere possibility of a panic would do interesting things to prices (ah yes, it would start another natural gas drilling boom, followed by a glut).

There has been a surge of derailments of trains carrying crude oil that resulted in huge, deadly explosions – highly unusual for crude oil trains. But the oil originated from the Bakken shale formation in North Dakota. Read…. Fracking Fluids to Blame for Rail Car Explosions

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