Energy Prospectus

Working gas in storage was 1,143 Bcf as of Friday, March 15, 2019, according to EIA estimates. This represents a net decrease of 47 Bcf from the previous week.
Stocks were 315 Bcf less than last year at this time and 556 Bcf below the five-year average of 1,699 Bcf.
At 1,143 Bcf, total working gas is within the five-year historical range.

The draw is lower than I expected, but we should see at least three more draws from storage before the end of the winter heating season. It now looks like storage will be 1,000 to 1,050 BCF on March 31st. That compares to the 5-year average of 1,637 BCF.

If storage is ~600 Bcf below the 5-year average on March 31st, that will add about 3 Bcf per day of additional demand during the ~200 day refill season. That should be enough additional demand to keep gas prices above what I am using in all of my forecast valuation models. Regardless, I do not anticipate natural gas prices plunging this summer despite all of the FEAR out there that a huge surge of supply from the Permian Basin is just around the corner. EIA has been forecasting a surge in supply for over a year that has not happened, which is why storage is so low today.

The lowest gas storage level in the last ten years happened in March, 2014 when storage dipped to 824 BCF (the bottom of today's 5-year average).

For years I have been tracking the volume of gas going in and out of storage. Since natural gas prices are based on regional supply/demand, this is the best way to see if the U.S. gas market is loose or tight. Obviously, it is much tighter than the gas price suggests.

From December 15, 2018 to January 11, 2019 (four weeks) there was very mild winter weather in the U.S. As a result of the mild period, storage draws were 370 BCF below the 5-year average during those 28 days. If we would have had normal winter weather during that period, there would have been significant shortages and high gas prices in several regions during late February and all of March. The U.S. dodged a bullet.

The U.S. has an extensive natural gas storage system that has capacity to hold up to ~4,500 BCF.

With more and more homes and businesses depending on gas for space heating each winter, we need ~4,000 Bcf in storage by mid-November to safely make it through a winter. Refilling storage each summer IS NOT AN OPTION. During the ~200 day refill season in 2019 that begins April 1st, we will need ~3,000 Bcf (~15 Bcfpd) going into storage this year.

Last year's refill season started late (April 21) and ended early (November 9). During that period 1,963 Bcf was added to storage. This year, the task of refilling storage is much harder.

Watch Joe Bastardi's daily update here: https://www.weatherbell.com/premium/

It looks like the last two weeks of March will end up being cooler than normal and then we should switch to a warmer than normal pattern in early April. A quick switch to more homes running AC units is bullish for natural gas demand because so many areas now rely heavily on natural gas fired power plants for electricity.

Go here to see that Q3 strip prices are trading well above what I am using in all of my forecast models
https://www.cmegroup.com/trading/energy ... l-gas.html