Gas Market Update - Jan 25

[dan_s]

From BMO Commodity Products Group after the markets closed on 1/25:
"Prompt Nymex had its second strong day in a row increasing $0.08 to close at $3.178 (smack in the middle of the 200d MA at 3.16 and the 21d MA at 3.19) gaining back ~40% of what it lost vs last week. Building on the momentum of yesterday’s larger than expected inventory draw and shifting weather outlooks that expect cooler than average temperatures across the Eastern US (market concerned about deliverability issues) the curve shifted upwards across the board, with the big move concentrated in the front two months. Given the continued high production rates (~84.4 bcf/d) the gas market will need continued cold temps to support any sort of sustained rally. The current week finishes at 224.8 GWHDDs, just 9.2 points above the ten-year normal. A warm West and Southeast helped mitigate an otherwise colder Midwest/Northeast we mentioned above. Yesterday, Enbridge updated on its TETCO line, shut down since a January 21 explosion saying the company is working on returning 1 Bcf/d of flows through the Berne Compressor station in Noble County, Ohio between January 28 and 30. If this happens as projected, it will help alleviate a potentially dire situation surrounding South Central deliverability during the peak cold scheduled to simultaneously hit the Northeast, Midwest and South Central Jan 30th-31st."

MY TAKE:
This Polar Vortex "Super Cold" blast will do more than increase demand for space heating. It will also cause production problems. All wells produce some liquids and when temps go sub zero you get well "freeze offs". It can also cause pipeline and processing facility problems. The big cities around the Great Lakes, especially Chicago, are going to burn up a lot of gas next week. I predict that we see a 300+ BCF draw from storage for the weeks ending Feb. 1 and Feb 8. For the four weeks ending Feb. 15th over a Trillion Cubic Feet will be drawn from storage. If the cold persists into March there will be lots of "dire situations" in large cities that depend on a steady flow of natural gas."

PS: A lot of homes in the rural areas where this first "Super Cold" wave is hitting use propane to heat and cook with.

PPS: I grew up in St. Louis. We had a cabin on the Illinois River about twenty miles north of where it connects with the Mississippi. In the 1960s I remember when the Illinois River froze solid. It may happen again this February.