Natural Gas Storage Report - April 10

[dan_s]

Working gas in storage was 826 Bcf as of Friday, April 4, 2014, according to EIA estimates. This represents a net increase of 4 Bcf from the previous week. Stocks were 849 Bcf less than last year at this time and 997 Bcf below the 5-year average of 1,823 Bcf.

Storage is a TRILLION CUBIC FEET BELOW the 5-year average. Where is this extra TCF coming from?

This small injection is about what I expected to see. In fact, several estimates I got this week were for a build of 20 bcf.

So, natural gas storage ended the winter at 822 bcf. That is lower than it has been (by a wide margin) since 2005 and there is a heck of a lot more demand for gas today than there was nine years ago. FYI U.S. natural gas demand is 5 TCF per year higher today than it was in 2005.

The EIA website says they expect injections to be 2,500 bcf before winter draws begin mid-November. So, according to EIA, we should start next winter at 3,322 bcf. Keep in mind that injections of 2,500 bcf would be an ALL-TIME record.

Last year's injections were 2,141 bcf (with a rather mild summer and no hurricane activity in the Gulf of Mexico).

There are 32 weeks between now and when draws from storage begin in the 3rd week of November. That means injections must average 78.1 bcf per week to reach the EIA forecast. Again, injections have NEVER averaged this high.

Let's say we have a mild summer and no hurricane activity that hampers production and we get to 3,400 bcf in storage to start next winter. THAT ISN'T ENOUGH !!!!!!!!!!!!!!. We started last winter with 3,834 bcf in storage and look what happened.

My take is that if injections average less than 80 bcf per week between now and the end of June, we will see natural gas prices moving higher. Keep in mind that injections always go down in July and August as demand for power generation goes up. If it begins to look like next winter will start with less than 3,400 bcf in storage the utilities are going to get very aggressive in their need to get supply for their cities.

BTW I saw a report that said the Great Lakes are much colder than normal and the evening temps in the cities along the lakes will keep evening temps cold enough for furnaces to remain on at night into early June. AND Canada has less gas to send the U.S. since they have to rebuild their own depleted storage.

[dan_s]

If you want to add more natural gas to your portfolio take a look at:

XEC, EOG, GPOR, RRC, SM, UNT, CRK and GST

RRC, UNT and CRK have the most exposure to natural gas prices.

Read our new profile on CRK. I could be a major turnaround story for us and will draw a lot of attention during the 2nd half of this year if gas prices are on the rise.

Rising gas prices are also very bullish for the onshore drillers. See our Drillers Watch List.

[Laurin_DE]

Dan,
what about Bellatrix, BXE?

cheers - Laurin

[dan_s]

That one is not on my radar screen, but others might have some comments. - Dan

[dan_s]

BXE does look good. It is a high growth Canadian that is in the Cardium with Lightstream. Take a look at their new presentation. They have some slides that show all the potential stacked pays in the Cardium area. This is why I think Lightstream is so undervalued.

At today's oil price, the economics on the Cardium are fantastic.

[Laurin_DE]

Thanks, Dan.
I've already started a small position some weeks ago and wait for an entry point to possibly buy some more.
However, I decreased my Lightstream position substantially, because I doubt that with so many good properties on the market, Lightstream will be able to get reasonably good prices for what they want (have) to sell (same with Swift?).

Laurin

[dan_s]

I actually wish SFY would hang onto their assets in Louisiana. I think they will be a lot more valuable by year-end if I am right about natural gas prices. Lightstream should make it even if they don't sell anything else. $100/bbl WTI really helps both of these companies.