Natural Gas Storage / Price

Natural Gas Storage / Price

Postby dan_s » Sun Feb 10, 2019 2:33 pm

Susan & I just returned home after another fantastic EPG Cruise.

The storage report for the week ending February 1st showed a draw that was much larger than the 5-year average, but smaller than I was expecting. I though "Polar Vortex #1" would have caused a draw over 300 BCF.

Below are thought from the energy team at Raymond James:

This week’s withdrawal of 237 Bcf was in-line with the consensus estimate of a 237 Bcfwithdrawal (neutral). This implies that the market was 9.6 Bcf/d looser (bearish) than last year on a weather-adjusted basis, and it has averaged 5.4 Bcf/d looser over the past four weeks. Total gas in storage now stands at 1,960 Bcf, and the y/y storage difference of 0 Bcf fell by 118 for a year-over-year storage deficit of 118.

Longer term, with associated gas production remaining robust, the market needs only modest supply growth from Appalachia (and likely declines in most other gas plays) to balance. We expect 2019 should prove to be a positive year for natural gas demand as both exports to Mexico and outbound LNG tanker activity ramp up. On the supply side, more associated gas supply is expected. However, we believe an increasing domestic gas supply and growth in renewables that are increasingly becoming more cost competitive with gas are putting further pressure on Henry Hub gas prices.


Oil prices are trending higher than what I've used in my forecast/valuation models, but natural gas prices are now under what I used in my models. Still two months of winter weather to deal with and we are sure to end the heating season with gas storage below the 5-year average.
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 20587
Joined: Fri Apr 23, 2010 8:22 am

Re: Natural Gas Storage / Price

Postby dave_n » Mon Feb 11, 2019 1:27 pm

Dan, I've been through school of hard knocks on UNG this year. Things I wish I knew before heading down that path, which could help someone else in the group...

1. UNG sells front-month contract on 14th-16th of every month. Usually 15th, with some lag depending on market conditions. So right now, they hold March 2019 NYMEX contract and they will turn over to April by Friday.
2. The turnover of contracts on the 15th creates a volume spike on 15th, which I've observed often pushes down price on front month NYMEX.
3. As Dan noted in several posts, end of month (end of front month) contract turnover can push gas prices down dramatically when demand soft. Price push down #2.
4. UNG is priced mostly on NYMEX contract. Rookie mistake- NYMEX settles at Henry Hub.
5. Henry Hub pricing generally driven by South Central - Salt Storage. If draw-down on Salt Storage low, NYMEX blah... Recent lift in UNG/NYMEX came from larger than expected draw from Salt Storage.

That's what I've got so far. I'll know more for next year. If others have more info, would be great to share.

Thx,

Dave
dave_n
 
Posts: 80
Joined: Thu Aug 09, 2018 4:08 pm

Re: Natural Gas Storage / Price

Postby dan_s » Mon Feb 11, 2019 5:56 pm

BMO Capital Markets 2/11/2019:

"March gained .06 today to settle at 2.642 as weather forecasts turned bullish over the weekend, although prices reached as high as 2.74 intraday. Resistance lies near today’s highs between 2.73-2.74 as that area was the low end of the range from this summer before the run up as well as an area that failed to break early last week. We view 2.90 as the next resistance level should we break higher. The back end of the curve lagged the front significantly as continued producer selling in 20-22 keeps a lid on that section of the curve. There is an order-based seller of the 20-22 strip OTC who offers the market considerably through where the spreads imply value. Cal20 should meet resistance again near 2.75 (currently 2.735) but the 21-22 part of the curve is too cheap in our opinion at 2.64 and 2.65 respectively. Implied volume was unchanged in March today range more than covering break-evens of .0575. We expect daily moves to continue to outpace. Summer19 volume was down .5% as summer moved higher by 5c today."
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 20587
Joined: Fri Apr 23, 2010 8:22 am


Return to The View from Houston

Who is online

Users browsing this forum: No registered users and 8 guests

cron