Energy Prospectus

Working gas in storage was 1,760 Bcf as of Friday, February 16, 2018, according to EIA estimates. This represents a net decrease of 124 Bcf from the previous week. Stocks were 609 Bcf less than last year at this time and 412 Bcf below the five-year average of 2,172 Bcf. At 1,760 Bcf, total working gas is within the five-year historical range.

My SWAG remains that we will end the winter heating season with ~800 Bcf less gas in storage than we had last year on March 31st.

The refill season (April to October) is 214 days long, so that will increase demand by 3.7 Bcfpd during the refill season.

Old Man Winter is coming back in March.

The 5-year average amount of gas in storage on March 31st is 1,700 Bcf. We will be well below that at the end of February.

Based on actual state reports.

Total U.S. dry gas production
72,849,107 Mcf per day for twelve months of 2016 (366 days)
72,738,184 Mcf per day for the ten months Jan to Oct in 2017 (304 days)

I believe gas production has ramped up recently, but has it increased more than demand? No evidence so far.

In the 49 weeks ending 2/16/2017, the delta to the 5-year average change in gas storage is a -788 Bcf. < That is how much demand has exceeded the 5-year average since mid-March of last year.

Does this square up to what we keep being told by EIA that we have a huge surplus of natural gas production capacity?

I have listened to a lot of conference calls lately and the related guidance on several companies including those in Sweet 16. The mantra seems to be live within cash flow. Frankly I don’t come away with the WS perception of a 7-8 bcf a day increase in gas production. Also it is unclear how that much gas would transported to storage or markets.

I think the year is going to end a lot better for our gassers than it started.

I agree. The actual natural gas storage data sure doesn't reflect the huge increase in natural gas production that EIA keeps telling us about. I track the natural gas going in and out of storage carefully. Since the end of last winter (3/31/2017) the delta to the 5-year average change in gas storage level is -788 BCF. That tells me that since last winter the U.S. gas market has gotten a heck of a lot tighter.

There is no doubt that we have lots of natural gas reserves, but reserves in the ground and "production capacity" are two totally different things.

So ..., what could change the perception of the gas traders and push up gas prices?
1. We end winter with gas in storage way below were it was a year ago and way below the 5-year average. < This is going to happen for sure.
2. We have an early and hot start to summer demand for AC. With more and more areas depending on natural gas fired power plants, this could push ngas storage even lower than the 5-year average in Q2.
3. Lots of the new gas coming on-line is in the Delaware Basin. I think the pipeline capacity way out there is limited.