Energy Prospectus

Working gas in storage was 2,584 Bcf as of Friday, January 12, 2018, according to EIA estimates. This represents a net decrease of 183 Bcf from the previous week. Stocks were 368 Bcf less than last year at this time and 362 Bcf below the five-year average of 2,946 Bcf. At 2,584 Bcf, total working gas is within the five-year historical range (very close to bottom of the 5-year range).

Next week's storage report (for the week ending January 19) is going to be a BIG ONE. My SWAG is a draw of more than 250 BCF, which will push storage close to 450 BCF below the 5-year average.

After this week, it does look like the eastern half of the U.S. will warm up a bit. Long range forecast is for February and March to be colder than normal in the eastern half of the U.S. Big cities east of the Rockies are where most of the natural gas is consumed for space heating, so warmer than normal winter in the western U.S. has very little impact on gas demand for space heating.

At the end of March natural gas in storage 5-year average is approximately 1,700 Bcf. This year we will be way below that.

The markets believe that natural gas production will be increasing from the Utica, Marcellus and Haynesville as well as from additional oil wells drilled in the Eagle Ford and Permian Basins. As a result, natural gas prices have not reflected the projected increased demand from the colder than normal December and January. So far, we are not seeing the increased supply the markets are expecting. This is partially due to the wells freezing off during this cold. We can look forward to two significant draws from natural gas storage in the coming weeks. We will see if the market reacts to the larger than normal (higher than the five year average) draws plus the forecasts for a cold February and March later this month.

Texas set a record yesterday for power demand. People in some areas around Houston are being asked to conserve electric power. Houston and other southern cities have not seen snow twice in a winter season in a long time. It is not unheard of, just not very frequent.

Go here http://www.americanoilman.com/ to see weekly injections and draws for storage for the last five years. Be sure to look at the charts.