Why is natural gas at $2.85/MMBtu
Posted: Fri May 18, 2018 9:02 am
... because it is HOT in Texas and getting hotter.
U.S. Natural Gas Storage Recap from Tudor Pickering Holt (TPH)
Inventory deficit closes ~2% w/w, but warm weather outlook constructive for pricing.
Sector: Macro | Ticker: HHUB | Recommendation: NR | Target: Close | Close: $2.85/mcf
"106bcf injection in-line with expectations (105bcf). This week's 45 TDD was significantly lower than the 5-yr norm, 64 TDD....indicating that the market remains oversupplied on a weather-adjusted basis. Warmer-than-normal temperatures continue to be expected across the lower US as CDD likely overtakes HDD. If proven accurate, warm weather will become a boon for pricing as we enter the summer cooling season. Nationally, US dry production failed to break past the 80bcfd barrier, Mexican exports remain at ~4.3bcfd, and LNG exports were flat w/w at ~3.4bcfd. 2018's natural gas inventories now ~25% lower than 5-yr norms."
This year we have a shorter than normal refill season and the U.S. natural gas storage level is 25% lower than the 5-year average for this time of year. As the summer heat spreads, so does natural gas demand for power generation. If storage is 300 Bcf below the 5-year average heading into July (~99% probability) then my SWAG is that ngas price at HH goes over $3.00/MMBtu.
On May 11 storage was 501 Bcf below the 5-year average.
U.S. Natural Gas Storage Recap from Tudor Pickering Holt (TPH)
Inventory deficit closes ~2% w/w, but warm weather outlook constructive for pricing.
Sector: Macro | Ticker: HHUB | Recommendation: NR | Target: Close | Close: $2.85/mcf
"106bcf injection in-line with expectations (105bcf). This week's 45 TDD was significantly lower than the 5-yr norm, 64 TDD....indicating that the market remains oversupplied on a weather-adjusted basis. Warmer-than-normal temperatures continue to be expected across the lower US as CDD likely overtakes HDD. If proven accurate, warm weather will become a boon for pricing as we enter the summer cooling season. Nationally, US dry production failed to break past the 80bcfd barrier, Mexican exports remain at ~4.3bcfd, and LNG exports were flat w/w at ~3.4bcfd. 2018's natural gas inventories now ~25% lower than 5-yr norms."
This year we have a shorter than normal refill season and the U.S. natural gas storage level is 25% lower than the 5-year average for this time of year. As the summer heat spreads, so does natural gas demand for power generation. If storage is 300 Bcf below the 5-year average heading into July (~99% probability) then my SWAG is that ngas price at HH goes over $3.00/MMBtu.
On May 11 storage was 501 Bcf below the 5-year average.