Natural Gas Storage Report - Feb 9

[dan_s]

Working gas in storage was 2,559 Bcf as of Friday, February 3, 2017, according to EIA estimates. This represents a net decrease of 152 Bcf from the previous week. Stocks were 325 Bcf less than last year at this time and 45 Bcf above the five-year average of 2,514 Bcf. At 2,559 Bcf, total working gas is within the five-year historical range.

Go here and then click on Gas Storage: http://www.americanoilman.com/

The next two storage reports s/b close to the draws reported last winter for the same two weeks. After that, the gap to last year's storage levels should grow. My SWAG is that there will be at least 600 Bcf less gas in storage at the end of March then there was last year.

Over the last 40 weeks the net increase/decrease in storage has been -66 Bcf, compared to +708 Bcf for the 5-year average.

We actually began this winter heating season with more gas in storage than we had last year and we are going to end this winter heating season with a heck of a lot less gas in storage. Refilling storage each summer is a big part of demand.

The storage refill season is April 1 to November 30, 244 days. So, compared to last summer, there will be an increase of 2.5 Bcf per day in natural gas demand April to November to refill storage. I think all of you will agree that this is a rather significant increase in demand for a country that produces approximately 72.5 Bcf per day.

If you want to confirm U.S. natural gas production, go the EIA website and search "natural gas production". From 2015 to 2016 U.S. dry gas production has declined from 74.136 Bcf per day to 72.403 Bcf per day. The drop in Eagle Ford production has accounted for almost all of the decline.

[mikelp]

Dan

what's your thoughts on natgas prices short-term?

weather forecasts look bearish for rest of February
and March looks a bit colder but uncertain,

some traders are saying probaby stuck in $2.78 to $3.00 trading range short term

long term still looks bullish for reasons you have explained here....

thanks

[dan_s]

Here are the oil and natural gas prices that I am using for my forecast models. Of course, I hope the actual prices will be higher.

Note that in each forecast model I do my best to adjust for individual company hedges and for regional price differentials.

WTI (note the change since early January)
Q1 2017: $52
Q2 2017: $55
Q3 2017: $60
Q4 2017: $60
Yr 2018: $60

Henry Hub gas
Q1 2017: $3.25
Q2 2017: $3.00
Q3 2017: $3.25
Q4 2017: $3.50
Yr 2018: $3.50

As I have been saying in my podcasts, REGARDLESS OF THE WEATHER IN FEBRUARY AND MARCH, the U.S. natural gas market is going to be much tighter in 2017 than it was in 2016. PLEASE confirm this yourself by going to the EIA website and searching "natural gas production". Because the 2015-2016 winter left so much gas in storage the reduced demand to refill storage masked the tightness last year. Today, ngas storage is very close to the 5-year average.