NATURAL GAS INVENTORY (Week Ended 11/13/15)
Current: 4,000 Bcf
Actual Injection/(Withdrawal), per EIA: 15 Bcf
Economist Average Estimate, per Bloomberg: 19 Bcf
Previous: 3,985 Bcf (Revised from 3,978)
Draws from storage should start next week.
Natural Gas Storage - Nov.19
Natural Gas Storage - Nov.19
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Storage - Nov.19
Gas Now 2 Years Off as El Nino Swells Inventories - Bloomberg Business
The outlook for U.S. natural gas’s recovery got worse this week and you can blame the usual suspects: weather and record inventories.
Futures weakened across the forward curve with gas being sold for less than $3 per million British thermal units until January 2018, based on contracts sold on the New York Mercantile Exchange. A week ago, deliveries for January and February 2017 were priced above $3.
So what happened?
A government report Thursday showed that gas inventories last week soared to an all-time high of 4 trillion cubic feet, crossing a psychological threshold for analysts and traders. The mild weather that contributed to the record may stick around this winter thanks to El Nino, a weather pattern associated with above-normal temperatures in the Northeast and Midwest, the biggest consumers of heating fuels.
“It’s not just about this winter,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “El Nino pushed that pessimism into next winter. Now $3 is off the board until 2018.”
Gas slid 13.1 cents or 5.8 percent to close at $2.145 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Oct. 28. Gas prices tumbled 9.1 percent this week, capping the biggest decline since the week ended Jan. 29.
Meanwhile, gas production will increase 6.3 percent this year to a record 79.61 billion cubic feet a day, expanding for the 10th straight year, U.S. Energy Information Administration data show. Output is rising as drilling becomes more efficient and new pipelines link wells at shale deposits such as the Marcellus and Utica in the East to consumers. Average daily output will rise by 2 percent next year to 81.20 billion.
Supplies expanded even as U.S. drillers cut rigs down to a record low 193 last week, Baker Hughes Inc. data show. Northeast drillers have also curtailed about 900 million cubic a day of production because of low gas prices, Williams Cos., the Tulsa, Oklahoma-based pipeline operator, said in a presentation last month.
Wiping out the backlog of uncompleted wells and the return of shut-in wells will boost output next year, Viswanath said.
“The storage situation is worse than it’s implied in our weekly storage number because we know that the Appalachian Basin has become a de facto reservoir,” Viswanath said.
Forecasts for mild weather amid the supply glut led Dominick Chirichella, senior partner at the Energy Management Institute in New York, to change his view on gas “back to cautiously bearish” from neutral as recently as Tuesday, he said in a note to clients Friday.
“The market remains oversupplied and inventories are now at a new record high level for this time of the year,” Chirichella said.
The outlook for U.S. natural gas’s recovery got worse this week and you can blame the usual suspects: weather and record inventories.
Futures weakened across the forward curve with gas being sold for less than $3 per million British thermal units until January 2018, based on contracts sold on the New York Mercantile Exchange. A week ago, deliveries for January and February 2017 were priced above $3.
So what happened?
A government report Thursday showed that gas inventories last week soared to an all-time high of 4 trillion cubic feet, crossing a psychological threshold for analysts and traders. The mild weather that contributed to the record may stick around this winter thanks to El Nino, a weather pattern associated with above-normal temperatures in the Northeast and Midwest, the biggest consumers of heating fuels.
“It’s not just about this winter,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “El Nino pushed that pessimism into next winter. Now $3 is off the board until 2018.”
Gas slid 13.1 cents or 5.8 percent to close at $2.145 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Oct. 28. Gas prices tumbled 9.1 percent this week, capping the biggest decline since the week ended Jan. 29.
Meanwhile, gas production will increase 6.3 percent this year to a record 79.61 billion cubic feet a day, expanding for the 10th straight year, U.S. Energy Information Administration data show. Output is rising as drilling becomes more efficient and new pipelines link wells at shale deposits such as the Marcellus and Utica in the East to consumers. Average daily output will rise by 2 percent next year to 81.20 billion.
Supplies expanded even as U.S. drillers cut rigs down to a record low 193 last week, Baker Hughes Inc. data show. Northeast drillers have also curtailed about 900 million cubic a day of production because of low gas prices, Williams Cos., the Tulsa, Oklahoma-based pipeline operator, said in a presentation last month.
Wiping out the backlog of uncompleted wells and the return of shut-in wells will boost output next year, Viswanath said.
“The storage situation is worse than it’s implied in our weekly storage number because we know that the Appalachian Basin has become a de facto reservoir,” Viswanath said.
Forecasts for mild weather amid the supply glut led Dominick Chirichella, senior partner at the Energy Management Institute in New York, to change his view on gas “back to cautiously bearish” from neutral as recently as Tuesday, he said in a note to clients Friday.
“The market remains oversupplied and inventories are now at a new record high level for this time of the year,” Chirichella said.
Re: Natural Gas Storage - Nov.19
U.S. natural gas production will be up year-over-year in 2015 as a result of the spike in production during the first four months of 2015. However, gas production is now on decline and the rate of decline will accelerate as we are now not completing nearly enough gas wells to offset steep declines in the shale gas plays. U.S. natural gas production is now declining by approximately 400 MMcf per day each month or 1.2 Bcf per day each quarter. See: http://www.eia.gov/petroleum/drilling/#tabs-summary-2
Storage is high today, but only 207 Bcf above the 5-year average. The word "glut" is way overused these days!
The thing to remember about Super El Nino winters is that they do start out mild, but they come on very strong with record amounts of snow and all of the snow cover and moisture keeps winter around well into April. Actually the first half of December weather is now looking more favorable for increasing gas demand. See forecast update at the link below.
For 2015 the U.S. natural gas market is expected to be 30.5 Trillion Cubic Feet or approximately 83.5 Bcf per day. However, the U.S. gas market is very seasonal. In the winter months, demand can spike to over 120 Bcf per day, which is why the U.S. needed to build a massive storage complex and delivery system for natural gas. This system grows each year, so we actually do need more gas in storage at the beginning of each winter heating season. A very high percentage of new homes and offices heat with natural gas.
The gas prices quoted in the article posted above are NYMEX strip prices. Those prices change daily and they are never locked in until the day the monthly contract expires. The NYMEX strip is not a good forecaster of oil or gas prices. Those contracts are derivatives based on today's commodity prices, something like Calls and Puts on stocks. Gas prices have a history of moving very fast during the winter months. For an update on the winter weather forecast see: http://www.weatherbell.com/saturday-sum ... er-21-2015
Storage is high today, but only 207 Bcf above the 5-year average. The word "glut" is way overused these days!
The thing to remember about Super El Nino winters is that they do start out mild, but they come on very strong with record amounts of snow and all of the snow cover and moisture keeps winter around well into April. Actually the first half of December weather is now looking more favorable for increasing gas demand. See forecast update at the link below.
For 2015 the U.S. natural gas market is expected to be 30.5 Trillion Cubic Feet or approximately 83.5 Bcf per day. However, the U.S. gas market is very seasonal. In the winter months, demand can spike to over 120 Bcf per day, which is why the U.S. needed to build a massive storage complex and delivery system for natural gas. This system grows each year, so we actually do need more gas in storage at the beginning of each winter heating season. A very high percentage of new homes and offices heat with natural gas.
The gas prices quoted in the article posted above are NYMEX strip prices. Those prices change daily and they are never locked in until the day the monthly contract expires. The NYMEX strip is not a good forecaster of oil or gas prices. Those contracts are derivatives based on today's commodity prices, something like Calls and Puts on stocks. Gas prices have a history of moving very fast during the winter months. For an update on the winter weather forecast see: http://www.weatherbell.com/saturday-sum ... er-21-2015
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group