Working gas in storage was 3,834 Bcf as of Friday, November 8, 2013, according to EIA estimates. This represents a net increase of 20 Bcf from the previous week. Stocks were 80 Bcf less than last year at this time and 58 Bcf above the 5-year average of 3,776 Bcf.
Next week's report should show the first draw from storage.
We definitely need a couple cold blasts before Christmas to have a shot at $4.00/mcf.
Natural Gas Storage Report - Nov. 14
Natural Gas Storage Report - Nov. 14
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Storage Report - Nov. 14
Adam Longson, CFA, CPA – Morgan Stanley
November 14, 2013
Evidence continues to build for our bearish 2014 outlook. The forward curve is increasingly reflecting our bearish view, but downside risk remains. Data confirm that production is accelerating as new infrastructure comes online in the Northeast. While seasonally stronger demand would normally help, offsetting headwinds point to tepid demand growth going forward. Moreover, not only is weather uncertain, but production could surprise to the upside given the backlog of uncompleted wells, new infrastructure, low breakeven costs in the NE and robust activity in gas-heavy oil plays.
New infrastructure reinforcing production growth. We now see supply growing 2.4 bcf/d YoY in 2014, a marginal upward revision from our previous 2.2 bcf/d. Northeast production has surged with new pipelines coming into service and more on the way. New processing capacity is also coming online over the next several months, which should only compound the problem (primarily in the Utica). Even with low prices, low breakeven costs and a large backlog of uncompleted wells should continue to support production growth.
Basis issues already spreading. Two new pipeline projects opened on Nov 1 helping to ease bottlenecks in the Northeast. While we are seeing relief for Tenn Z4, we are seeing basis weaken at M3 and Transco Z6-NY as new supply floods into these regions. Not only were these hubs historically priced at a premium, but the new discount is even more striking as it comes at a time of seasonally stronger heating demand. We view this basis reversal as indicative of the longer run basis challenges other regions face as Northeast production spreads.
Gas demand facing more competition in the power stack. The demand outlook is not helpful either. Nuclear and coal plants are returning from fall maintenance, challenging gas generation. Even if weather proves more constructive for heating demand, it will likely only delay the inevitable. After weather-related demand subsides, eroding underlying fund
November 14, 2013
Evidence continues to build for our bearish 2014 outlook. The forward curve is increasingly reflecting our bearish view, but downside risk remains. Data confirm that production is accelerating as new infrastructure comes online in the Northeast. While seasonally stronger demand would normally help, offsetting headwinds point to tepid demand growth going forward. Moreover, not only is weather uncertain, but production could surprise to the upside given the backlog of uncompleted wells, new infrastructure, low breakeven costs in the NE and robust activity in gas-heavy oil plays.
New infrastructure reinforcing production growth. We now see supply growing 2.4 bcf/d YoY in 2014, a marginal upward revision from our previous 2.2 bcf/d. Northeast production has surged with new pipelines coming into service and more on the way. New processing capacity is also coming online over the next several months, which should only compound the problem (primarily in the Utica). Even with low prices, low breakeven costs and a large backlog of uncompleted wells should continue to support production growth.
Basis issues already spreading. Two new pipeline projects opened on Nov 1 helping to ease bottlenecks in the Northeast. While we are seeing relief for Tenn Z4, we are seeing basis weaken at M3 and Transco Z6-NY as new supply floods into these regions. Not only were these hubs historically priced at a premium, but the new discount is even more striking as it comes at a time of seasonally stronger heating demand. We view this basis reversal as indicative of the longer run basis challenges other regions face as Northeast production spreads.
Gas demand facing more competition in the power stack. The demand outlook is not helpful either. Nuclear and coal plants are returning from fall maintenance, challenging gas generation. Even if weather proves more constructive for heating demand, it will likely only delay the inevitable. After weather-related demand subsides, eroding underlying fund
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Storage Report - Nov. 14
Near-term outlook for Ngas from CME Group:
For the second week in a row the post weekly inventory report sell-off was short-lived with Nat Gas prices recovering quickly and now closer to the upper end of the current trading range after spending several days very near the lower range support and actually breaching it on an intraday basis for a short period of time. The month of November is shaping up as a mixed period for weather related Nat Gas demand as the current weather heads toward a moderating period over major portions of the US.
The current weather is projected to experience above normal temperatures over major Nat Gas heating related parts of the country. This warming pattern is likely to be short lived as the latest NOAA six to ten day and eight to fourteen day forecasts are projecting a return to normal to below normal temperatures after the warm-up. The six to ten day forecast is projecting above normal temperatures over two-thirds of the western portion of the US for the period Nov 20th to the 24th. During this period there should be a below normal level of Nat Gas heating related consumption and thus an over performance in the weekly injections covering the same timeframe.
The eight to fourteen day projection is calling for a smaller area (about a third of the western region) expecting above normal temperatures with the east coast once again expecting below normal temperatures for the period Nov 22nd to Nov 28th. During this period weather related Nat Gas demand should start to increase modestly. That said the month of November is likely to show a below normal level of Nat Gas consumption averaged across the whole month and thus only mildly supportive for Nat Gas prices going forward.
From a technical perspective the spot Nymex Nat Gas futures contract is setting up once again for a test of the $3.64/mmbtu resistance level. This level has been tested twice so far this week failing both time to successfully breach and stay above this level for any length of time. That said the market has been trading well above the fall low of $3.379/mmbtu level hit on November 5th. With the period of time that the weather is remaining above normal decreasing we may have seen the lows of the fall season as the market readies itself for the heart of the winter heating season. I am expecting traders and investors to start to focus more attention on looking for opportunities to set new longs ahead of the winter rather than enter into large scale influx of selling in the short to medium term.
For the second week in a row the post weekly inventory report sell-off was short-lived with Nat Gas prices recovering quickly and now closer to the upper end of the current trading range after spending several days very near the lower range support and actually breaching it on an intraday basis for a short period of time. The month of November is shaping up as a mixed period for weather related Nat Gas demand as the current weather heads toward a moderating period over major portions of the US.
The current weather is projected to experience above normal temperatures over major Nat Gas heating related parts of the country. This warming pattern is likely to be short lived as the latest NOAA six to ten day and eight to fourteen day forecasts are projecting a return to normal to below normal temperatures after the warm-up. The six to ten day forecast is projecting above normal temperatures over two-thirds of the western portion of the US for the period Nov 20th to the 24th. During this period there should be a below normal level of Nat Gas heating related consumption and thus an over performance in the weekly injections covering the same timeframe.
The eight to fourteen day projection is calling for a smaller area (about a third of the western region) expecting above normal temperatures with the east coast once again expecting below normal temperatures for the period Nov 22nd to Nov 28th. During this period weather related Nat Gas demand should start to increase modestly. That said the month of November is likely to show a below normal level of Nat Gas consumption averaged across the whole month and thus only mildly supportive for Nat Gas prices going forward.
From a technical perspective the spot Nymex Nat Gas futures contract is setting up once again for a test of the $3.64/mmbtu resistance level. This level has been tested twice so far this week failing both time to successfully breach and stay above this level for any length of time. That said the market has been trading well above the fall low of $3.379/mmbtu level hit on November 5th. With the period of time that the weather is remaining above normal decreasing we may have seen the lows of the fall season as the market readies itself for the heart of the winter heating season. I am expecting traders and investors to start to focus more attention on looking for opportunities to set new longs ahead of the winter rather than enter into large scale influx of selling in the short to medium term.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group