Natural Gas Storage Report - Feb 25

[dan_s]

Working gas in storage was 2,584 Bcf as of Friday, February 19, 2016, according to EIA estimates. This represents a net decline of 117 Bcf from the previous week. Stocks were 615 Bcf higher than last year at this time and 577 Bcf above the five-year average of 2,007 Bcf. At 2,584 Bcf, total working gas is above the five-year historical range.

If we can get storage down to around 2,200 Bcf before the end of the winter heating season, it should be enough to support natural gas prices. The 5-year average for ending storage is approximately 1,600 Bcf.

At today's luncheon in Houston, I made the case that the United States natural gas market will be much tighter heading into next winter. If you go to the EIA "Drilling Productivity Report" you will see that U.S. onshore gas production will decline by over 5 Bcf per day during 2016. We now get very little of our gas from the Gulf of Mexico, so we can assume that GOM supply is flat. Demand for gas for exports, power generation and industrial demand (fuel and feedstock) is expected to go up by 3 Bcf per day this year. An 8 Bcfpd tighter market is a BIG DEAL.

"Every week, the EIA proclaims a new record for natural gas production. But their own forecasts show that the U.S. will be short on supply by October of this year. A price increase is inevitable beginning later in 2016." - Art Berman on February 21, 2016

Read this: http://www.artberman.com/natural-gas-pr ... e-in-2016/

The United States is approximately a 30 Trillion Cubic Foot annual market (~82 Bcf per day), so an 8 Bcf per day shift in supply/demand is quite significant. It is very important to remember that we now produce about 76 bcfpd and import the balance from Canada. By the end of 2017 our exports of gas will balance out what we get from Canada.

This is not something that will impact natural gas prices in the near-term. Heck, this market does not look past tomorrow! However, it will become a major story by the time next winter rolls around.