Natural Gas Storage / Price
Posted: 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.
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.