The next two natural gas storage reports should be quite interesting because they should both top the 5-year average by a rather wide margin; especially the one for the week ending 1/19/2018. The 5-year average for the week ending 1/12 is -178 Bcf and the 5-year average for the week ending 1/19 is -167 Bcf.
My SWAG is that both storage reports will easily beat the 5-year average and push storage more than 500 Bcf below the 5-year average on January 19, 2018. The only time storage got that far below the 5-year average was in January, 2014 and ngas spiked to $6.00.
I DO NOT THINK THE GAS PRICES WILL SPIKE ANYWHERE CLOSE TO THE JANUARY, 2014 PRICE. I am just pointing out that we are definitely on a path to end the winter heating season with U.S. gas in storage at a much lower level than we've seen in a few years.
Since storage must be refilled before the next winter heating season, this is additional demand that the market did not anticipate a few months ago. This is one of the main reason that my forecast of natural gas averaging $3.00/MMBtu still seems reasonable to me. Again, where storage ends up heading into April is important. We still have a few months to watch the gas market carefully.
Natural Gas Market
Natural Gas Market
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Market
BMO Capital Markets: "The cold weather forecast for the Gulf Region is stoking fears over regional supply in a two-fold manner, where on-going issues with freeze-offs threaten the supply side for longer than expected at the same time that demand is running at peak levels."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Market
Energy guru Charif Souki, the chairman and co-founder of Tellurian, told CNBC on Wednesday that the natural gas industry is going to need a major fund infusion to keep drilling: "Just the amount of gas that is already behind pipe, or that is going to be found because of oil production at $60 a barrel, is going to require over $150 billion of infrastructure investment over the next five years." But Souki, one of the few executives in the space who called both the collapse and recovery in oil prices, said infrastructure was proving to be a bigger hurdle than many people think. "We had very low prices for three years and therefore all the producers are now not very financially stable so they cannot invest. And the U.S. is a savior," Souki said. "However, we don't have the infrastructure to take it to the water. We've been geared to take it from the water to the rest of the country, and now we have to be able to get it from where it's produced to the water, and that infrastructure doesn't exist."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Market
China: Dirty Skies Turn Cash Toward Gas. Bloomberg
Chinese crude production last year missed a target of about 200 million tons set by the National Energy Administration in February. Gas also missed the goal of 170 billion cubic meters, though its share of total output rose to almost 41 percent, from 38 percent in 2016, Bloomberg calculations show. Analysts at BMI forecast crude output to fall a further 4 percent this year, while Wood Mackenzie sees the pace of declines slowing to 2.5 percent. They estimate gas will rise 5 percent and as much as 8 percent, respectively. China’s natural gas demand may advance 10 percent this year as the government continues to replace coal boilers, the research arm of China National Petroleum Corp. said in its annual market report this week. Almost 4 million households across 28 cities in northern China last year were asked to switch to gas, boosting demand and imports of the fuel.
Chinese crude production last year missed a target of about 200 million tons set by the National Energy Administration in February. Gas also missed the goal of 170 billion cubic meters, though its share of total output rose to almost 41 percent, from 38 percent in 2016, Bloomberg calculations show. Analysts at BMI forecast crude output to fall a further 4 percent this year, while Wood Mackenzie sees the pace of declines slowing to 2.5 percent. They estimate gas will rise 5 percent and as much as 8 percent, respectively. China’s natural gas demand may advance 10 percent this year as the government continues to replace coal boilers, the research arm of China National Petroleum Corp. said in its annual market report this week. Almost 4 million households across 28 cities in northern China last year were asked to switch to gas, boosting demand and imports of the fuel.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Market
Comments below are from the Gulfstar Group: http://www.gulfstargroup.com/
Natural gas markets, meanwhile, are not anticipating to be rescued by commodity price improvements. The U.S. became a net exporter of natural gas in 2017 for the first time in 59 years, with shipments to Mexico continuing to increase and more liquefied natural gas leaving American ports. LNG exports totaled 464 billion cubic feet through September 2017. Annualizing that figure yields a projected 2017 export total of 619 bcf, representing only 2.3% of the 26.7 trillion cubic feet of annual U.S. production (2.0% net of imported gas). While LNG exports can only benefit U.S. producers in the long-term, it is simply too small a portion of the total market to expect a material near-term impact.
Gas market conditions do, however, share some similarities with those experienced by oil markets 12 to 18 months ago. In addition to general expense reduction efforts, well design optimization continues to drive down the break-even to economic production. Average lateral lengths have nearly tripled in some basins over the last 10 years, now averaging more than 7,000 feet. Eclipse Resources set a U.S. record in June 2017 with a Utica gas well lateral of 19,500. Frac stages per well increased proportionately, while drilling days dropped in half. Proppant intensity across the industry has increased 60% in the last three years, and predictions are that pounds per feet will continue to increase as operators look for critical mass in production rates. As a result, many producers now cite break-even at less than $3.00/MMbtu and in some Haynesville and Utica plays less than $2.00/MMbtu. Natural gas’ recovery story will therefore continue to rely on operating efficiencies and production discipline.
Natural gas markets, meanwhile, are not anticipating to be rescued by commodity price improvements. The U.S. became a net exporter of natural gas in 2017 for the first time in 59 years, with shipments to Mexico continuing to increase and more liquefied natural gas leaving American ports. LNG exports totaled 464 billion cubic feet through September 2017. Annualizing that figure yields a projected 2017 export total of 619 bcf, representing only 2.3% of the 26.7 trillion cubic feet of annual U.S. production (2.0% net of imported gas). While LNG exports can only benefit U.S. producers in the long-term, it is simply too small a portion of the total market to expect a material near-term impact.
Gas market conditions do, however, share some similarities with those experienced by oil markets 12 to 18 months ago. In addition to general expense reduction efforts, well design optimization continues to drive down the break-even to economic production. Average lateral lengths have nearly tripled in some basins over the last 10 years, now averaging more than 7,000 feet. Eclipse Resources set a U.S. record in June 2017 with a Utica gas well lateral of 19,500. Frac stages per well increased proportionately, while drilling days dropped in half. Proppant intensity across the industry has increased 60% in the last three years, and predictions are that pounds per feet will continue to increase as operators look for critical mass in production rates. As a result, many producers now cite break-even at less than $3.00/MMbtu and in some Haynesville and Utica plays less than $2.00/MMbtu. Natural gas’ recovery story will therefore continue to rely on operating efficiencies and production discipline.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group