Natural Gas

[dan_s]

From TPH Morning Notes 4-10-2019

Midnight Sun in West Texas, Flaring Set to Rise
Economics and increased ESG focus incentivize upstream pipeline commitments
Sector: Macro | Ticker: Waha | Recommendation: NR | Target: NA | Close $0.35/mcf
With Waha pricing continuing to hover around zero despite the resumption of EPNG compression capacity, the path forward for incremental natural gas production points to a material increase in flaring over the next six months. While regulatory messaging has thus far been accommodative, the dramatic acceleration of ESG reporting and board interest raises the question of how flaring fits into that discussion. Flared natural gas contributes to industry emissions with liquids rich, associated gas generally having a higher concentration of byproducts given lower combustion efficiency. Though ESG concerns alone may not drive a wave of takeaway commitments, when combined with transport economics that are well in the money we suspect willingness to contract among the upstream community will see a step-change in coming months. KMI's Gulf Coast Express and Permian Highway add ~4.1 Bcf/d of capacity vs. the >5.0 Bcf/d of residue gas production growth we expect through exit to exit 2018-2021, necessitating ratable greenfield capacity adds beyond current queue.

Natural Gas Headed for a Leg Down?
100bcf build next week could be the catalyst
Sector: Macro | Ticker: HHUB | Recommendation: NR | Target: NA | Close: $2.71/mcf
While we're looking for a below consensus build in this week's EIA report, we see potential for the following week to report a 100+ bcf build, or 5x the 5-year avg, which would likely prove to be a negative catalyst for natural gas markets. Flow data for the current week shows res/comm demand falling off a cliff, down ~9bcfd w/w, which combined with depressed LNG demand and a slightly weaker pull from power and industrial, has total demand down ~12bcfd w/w. If these numbers hold for the balance of the week, it's possible next week's storage report shows >100bcf build, relative to a 5-year avg build of 20bcf, and a 36bcf draw last year. The 5x build vs. norms would reduce the storage deficit to 24%, down from 34% in just 3 weeks, further reducing any concerns over seasonally low storage levels.

[dan_s]

Forbes: U.S. Natural Gas Prices Remain Stagnant

"As we march on into the shoulder season, U.S. natural gas prices have remained stagnant, not moving over the past week. These boring times for the NYMEX gas market have really lingered since the end of January. For example, prices in January varied by nearly 80 cents, or 28%. Since then, prices have varied by just 33 cents, or 13%. We now have the lowest gas prices since mid-February. In contrast, oil prices are up nearly 20% since the end of January. For 2019 so far, U.S. gas production has been at 86 Bcf/d, versus 78 Bcf/d for year-ago levels. This has compensated for higher demand, at 106 Bcf/d this year, against 100 Bcf/d last year. It has been a warm start to April, especially as compared to last April, its coldest in nearly 25 years. Gas heating demand this month has averaged 30% lower than it did this time last April. The first three weeks of April 2018, for instance, were all withdrawals from inventory."

Storage differential to last year will probably be wiped out in April.