Cold in April = More demand for distillates
Posted: Wed Mar 14, 2018 10:15 am
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What Joe is forecasting for the next few weeks is obviously a bullish end of the heating season for natural gas, but it is also bullish for oil. Lots of homes in the Northeast still burn heating oil for space heating. Heating oil is a "distillate", like diesel.
It is difficult for refiners to make distillates from shale oil because it is too light. This is why diesel is selling at such a big premium to gasoline.
It is also very cold in Europe, which consumes a lot of heating oil.
If the first half of April is much colder than normal, it will extend the U.S. heating season and (more important) shorten the natural gas refill season. The refill season (April 1 to October 31) is 214 days. Knock out 14 days and it is down to 200 days. We know that the U.S. is going to end the winter heating season with AT LEAST 600 Bcf less gas in storage than we had last year. So, knowing that storage must be refilled, the deficit to last year adds AT LEAST 3 Bcfpd of additional demand for natural gas during the upcoming refill season. 3 Bcfpd is a BIG SPIKE in demand.
I DO NOT think this will push gas over $3.00/mcf unless we have a HOT SUMMER. I do think it will stabilize gas and NGL prices.
What Joe is forecasting for the next few weeks is obviously a bullish end of the heating season for natural gas, but it is also bullish for oil. Lots of homes in the Northeast still burn heating oil for space heating. Heating oil is a "distillate", like diesel.
It is difficult for refiners to make distillates from shale oil because it is too light. This is why diesel is selling at such a big premium to gasoline.
It is also very cold in Europe, which consumes a lot of heating oil.
If the first half of April is much colder than normal, it will extend the U.S. heating season and (more important) shorten the natural gas refill season. The refill season (April 1 to October 31) is 214 days. Knock out 14 days and it is down to 200 days. We know that the U.S. is going to end the winter heating season with AT LEAST 600 Bcf less gas in storage than we had last year. So, knowing that storage must be refilled, the deficit to last year adds AT LEAST 3 Bcfpd of additional demand for natural gas during the upcoming refill season. 3 Bcfpd is a BIG SPIKE in demand.
I DO NOT think this will push gas over $3.00/mcf unless we have a HOT SUMMER. I do think it will stabilize gas and NGL prices.