Working gas in storage was 2,369 Bcf as of Friday, May 12, 2017, according to EIA estimates. This represents a net increase of 68 Bcf from the previous week. Stocks were 375 Bcf less than last year at this time and 256 Bcf above the five-year average of 2,113 Bcf. At 2,369 Bcf, total working gas is within the five-year historical range.
Over the last two weeks the difference to the 5-year average has declined by 52 Bcf. I expect gas in storage to go below the 5-year average by the end of the 3rd quarter.
Remember that mid-May to mid-June is the annual period of largest increases in the storage level; the peak of "Shoulder Season". Over the next six weeks the injections to storage are usually 80 to 100 BCF. The highest increase in storage for a week was in the last week of May, 2015 when storage increased 132 BCF.
Art Berman's take on the U.S. natural gas market: http://www.artberman.com/strong-natural ... pply-2017/
Natural Gas Storage Report - May 18
Natural Gas Storage Report - May 18
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Storage Report - May 18
Comments below are from Robert Rapier, an EPG member.
Oil is the world's most traded commodity, and as an energy analyst, I spend more time talking about it than any other energy source. Natural gas is often an afterthought in stories that are focused on oil. But the U.S. natural gas renaissance is every bit as interesting as the crude oil story. So today let's catch up on the natural gas market.
It has been a remarkable ride over the past decade. In the first half of the previous decade, it was widely believed that a U.S. natural gas crisis was imminent. Gas production had been in decline since the 1970s, and many were certain that the outlook was grim.
But legendary oilman George Mitchell was experimenting with a combination of hydraulic fracturing and horizontal drilling, and during the last decade, the shale boom was born. The first successes were in U.S. shale gas plays. In 2006, production turned up and climbed for ten straight years to a new all-time high. Production in 2015 was 50% higher than in 2005 as a result of the gas unlocked from shale.
This surge of production had a big impact on prices. The spot price of natural gas was persistently above $5 per million Btu (MMBtu) prior to the boom -- sometimes spiking much higher -- but dropped below $2/MMBtu in 2012 and again in 2016. Production finally declined by 2.2% in 2016 as natural gas prices languished at decade-long lows.
Price fluctuations are driven in part by natural gas storage, which is seasonal. Producers use a system of underground pressurized storage that builds inventories until mid-fall, which are then depleted through the winter. Natural gas is stored in depleted oil or gas reservoirs, in natural aquifers, or in salt caverns.
Low prices in 2016 were driven by mild winters and record production, which kept these storage levels at the top of the maximum seasonal range for nearly the entire year.
So where do things currently stand? A year ago, natural gas prices were hovering just above $2/MMBtu. On one of my slides at last year's Investing Daily Wealth Summit, I wrote that natural gas had "much more upside than crude" (which was then trading at $49/bbl). Today, natural gas is trading more than 50% higher than a year ago at $3.28/MMBtu, while oil is trading a hair above $49 a barrel.
Production is still down year-over-year, but natural gas rig counts have doubled from a year ago. This will likely help stem the production decline over the next year. Inventories are slightly above the average for this time of year, which is mildly bearish for prices. But over the next few months, the summer weather will be the strongest driver of natural gas prices. If it's a long, hot summer, there will be a higher demand for natural gas from utilities. If summer is mild, high production will keep inventories at a high level and prices will be under downward pressure.
Investors should probably plan for natural gas prices to remain in the current range for the rest of the year. Although there will be some improvement in local pricing in the Marcellus and Utica shales as new pipelines come online and alleviate a bottleneck that has existed for several years. This will benefit producers in these regions.
Oil is the world's most traded commodity, and as an energy analyst, I spend more time talking about it than any other energy source. Natural gas is often an afterthought in stories that are focused on oil. But the U.S. natural gas renaissance is every bit as interesting as the crude oil story. So today let's catch up on the natural gas market.
It has been a remarkable ride over the past decade. In the first half of the previous decade, it was widely believed that a U.S. natural gas crisis was imminent. Gas production had been in decline since the 1970s, and many were certain that the outlook was grim.
But legendary oilman George Mitchell was experimenting with a combination of hydraulic fracturing and horizontal drilling, and during the last decade, the shale boom was born. The first successes were in U.S. shale gas plays. In 2006, production turned up and climbed for ten straight years to a new all-time high. Production in 2015 was 50% higher than in 2005 as a result of the gas unlocked from shale.
This surge of production had a big impact on prices. The spot price of natural gas was persistently above $5 per million Btu (MMBtu) prior to the boom -- sometimes spiking much higher -- but dropped below $2/MMBtu in 2012 and again in 2016. Production finally declined by 2.2% in 2016 as natural gas prices languished at decade-long lows.
Price fluctuations are driven in part by natural gas storage, which is seasonal. Producers use a system of underground pressurized storage that builds inventories until mid-fall, which are then depleted through the winter. Natural gas is stored in depleted oil or gas reservoirs, in natural aquifers, or in salt caverns.
Low prices in 2016 were driven by mild winters and record production, which kept these storage levels at the top of the maximum seasonal range for nearly the entire year.
So where do things currently stand? A year ago, natural gas prices were hovering just above $2/MMBtu. On one of my slides at last year's Investing Daily Wealth Summit, I wrote that natural gas had "much more upside than crude" (which was then trading at $49/bbl). Today, natural gas is trading more than 50% higher than a year ago at $3.28/MMBtu, while oil is trading a hair above $49 a barrel.
Production is still down year-over-year, but natural gas rig counts have doubled from a year ago. This will likely help stem the production decline over the next year. Inventories are slightly above the average for this time of year, which is mildly bearish for prices. But over the next few months, the summer weather will be the strongest driver of natural gas prices. If it's a long, hot summer, there will be a higher demand for natural gas from utilities. If summer is mild, high production will keep inventories at a high level and prices will be under downward pressure.
Investors should probably plan for natural gas prices to remain in the current range for the rest of the year. Although there will be some improvement in local pricing in the Marcellus and Utica shales as new pipelines come online and alleviate a bottleneck that has existed for several years. This will benefit producers in these regions.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group