EIA - Natural Gas Storage Report - May 18

Post Reply
dan_s
Posts: 34805
Joined: Fri Apr 23, 2010 8:22 am

EIA - Natural Gas Storage Report - May 18

Post by dan_s »

Working gas in storage was 2,240 Bcf as of Friday, May 12, 2023, according to EIA estimates.
This represents a net increase of 99 Bcf from the previous week.
Stocks were 521 Bcf higher than last year at this time and 340 Bcf above the five-year average of 1,900 Bcf.
At 2,240 Bcf, total working gas is within the five-year historical range.

Trading Economics:
"US natural gas futures surged by 6% to above $2.5/MMBTU, the highest in two months, driven by reduced gas exports from Canada, expectation of increased demand due to warmer weather and a smaller-than-expected storage build last week. US utilities added 99 billion cubic feet (bcf) of gas into storage during the week ended May 12, 2023, below market expectations of a 108 bcf increase. Additionally, gas exports from Canada, a major supplier to the US, have remained near a 25-month low due to wildfires in Alberta that led to the shutdown of oil and gas production and affected pipeline flows over the past couple of weeks. Furthermore, meteorologists forecast warmer-than-normal temperatures in the US for the upcoming period, which is expected to drive higher demand for natural gas for cooling purposes. Meanwhile, gas flows to major US LNG export plants have decreased from the record levels seen in April due to maintenance work at several facilities."

At the time to this post the Q3 NYMEX futures contract for HH gas are all up over 12 cents
JUL23 $2.64
AUG23 $2.71
SEP23 $2.70
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34805
Joined: Fri Apr 23, 2010 8:22 am

Re: EIA - Natural Gas Storage Report - May 18

Post by dan_s »

Always keep in mind that the oil and gas prices you see here at the front month NYMEX futures prices. The futures markets for all commodities are driven by paper traders (hedge funds that cannot take physical delivery of the oil & gas).

Several members discussed this with me after Tuesday's luncheon. This is why the gas futures market is so volatile.

The NYMEX strip prices for natural gas fell sharply in Q1.
> At the beginning of the 2022/2023 winter heating season there was less gas in storage than the 5-year average.
> There were two weeks of colder than normal temperatures in December, 2022.
> Paper traders went long on JAN to MAY HH ngas contracts.
> January, 2023 was much warmer than normal.
> The utilities that deliver ngas to your home or business determined that they had enough gas in storage, so they pulled out of the futures market.
> So, when the paper traders needed to close their long positions, there were no buyers to take their contracts and gas prices dropped sharply. The paper traders got crushed. < Our gassers still reported profits in Q1, because most of them have hedging programs and the large-caps (AR, EQT, RRC and even CRK) have very good marketing people that were able to get gas to regions paying higher prices for gas.

We should now be passed the period of more sellers than buyers in the paper market.

The utilities that generate your electricity are different than those that deliver natural gas to you.
> The futures market for HH Gas should now be back in balance. Number of buyers = number of sellers.
> Today, some utilities that generate your electricity feel like they need more gas supply. They are bidding up the futures contracts.
> Paper traders will be making money on gas contracts again and they will push up their longs; more demand for futures contracts beyond the front month.

Here is your assignment:
> Go to https://tradingeconomics.com/commodity/natural-gas and run a 25-year chart of natural gas.
> You will see some BIG spikes in the price of HH ngas.
> Note that many of them occur outside of the winter months.
> In the U.S. we burn a lot of natural gas to generate electricity.

MY TAKE: I don't expect the price of natural gas to move quickly back over $5.00, but the "Right Price" for natural gas is much higher than $2.50.
Dan Steffens
Energy Prospectus Group
Post Reply