Natural Gas Market getting tighter

[dan_s]

In its Natural Gas Monthly released today, the EIA outlined U.S. natural gas production and consumption for December 2016.

Natural gas production in December decreased slightly compared to November 2016, and represented a 3.7% decrease from production levels for December 2015. Consumption was the second highest in December in the last 15 years, up 10.6% from levels in December 2015.

[dan_s]

Details from EIA:

> In December 2016, for the tenth consecutive month, dry natural gas production decreased year-to-year from the same month in 2015. The preliminary level for dry natural gas production in December 2016 was 2,210 billion cubic feet (Bcf), or 71.3 Bcf/day. This level was a 2.7 Bcf/day (3.7%) decrease from the December 2015 level of 74.0 Bcf/day, and the lowest for December since 2013.

> Estimated natural gas consumption in December 2016 was 2,865 Bcf, or 92.4 Bcf/day. This level was an increase of 10.6%, or 8.8 Bcf/day, from the 2,591 Bcf consumed in December 2015. Dry gas consumption was the second highest for December since EIA began tracking it in 2001.

> Year-over-year total consumption of dry natural gas in December 2016 increased in three of the four consuming sectors, with the exception being electric power deliveries, which decreased year-to-year. Deliveries of natural gas by consuming sector in December 2016 were as follows:
>>>Residential deliveries in December 2016 were 797 Bcf, or 25.7 Bcf/day, up 34.9% from 19.1 Bcf/day in December 2015. Residential deliveries were the highest for December since 2013.
>>>Commercial deliveries were 464 Bcf, or 15.0 Bcf/day, up 31.8% from 11.4 Bcf/day in December 2015. Commercial deliveries were the highest for December since 2013.
>>>Industrial deliveries were 731 Bcf, or 23.6 Bcf/day, up 8.3% from 21.8 Bcf/day in December 2015. Industrial deliveries were the highest for December since EIA began tracking them in 2001.
>>>Electric power deliveries were 669 Bcf, or 21.6 Bcf/day, down 13.2% from 24.9 Bcf/day in December 2015.

[dan_s]

Note that the 2.7 Bcf decline in U.S. production from 2015 to 2016 is EXACTLY what I told you it was in my last podcast. I do not have a spy at EIA. I just figured it out myself.

The United States is a "closed market". Except for declining imports from Canada, we have no import capacity for natural gas.

[dan_s]

"Dec’16 US Lower 48 natural gas production fell 830mmcfd m/m as growth in PA and OH were more than offset by declines in TX, ND, NM, LA, CO. Since the peak in Feb’16, onshore gas production has declined a whopping 3.7bcfd…this decline was the reason we were bullish gas coming into winter (warm temps spoiled that party) and is why we believe near term gas prices could firm as weekly storage data shows the market undersupplied. We expect growth to resume in 2018 on the back on associated gas, so any gas price firmness/strength is likely short-lived." - TPH Energy Research

[dan_s]

This may surprise you a bit:

For the period October 1, 2016 to February 17, 2017 (20 weeks) natural gas in storage declined by 1,324 Bcf.

The 5-year average for the same 20 weeks is a decline of 1,287 Bcf.

So .... despite a rather mild winter, U.S. natural gas storage has declined more than the 5-year average.

Why??? Because U.S. natural gas production has declined by more than 2.5 Bcf per day from Q4 2015 to Q4 2016 and demand for gas has increased.

For the 42 weeks ending February 17, 2017 storage has declined by 671 Bcf compared to the 5-year average.