Natural Gas Market Update – 8/19/2016

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Storage Report – 8/18/2016

Thursday’s storage report cited an injection of 22 Bcf, less than expectations of a 27 Bcf build. As a comparison, last year’s injection for the same week was 52 Bcf, and the 5-year average is 57 Bcf.

Working gas in storage was 3,339 Bcf as of Friday, August 12th, 2016, according to EIA estimates. Inventory was reported at 327 Bcf (+10.9%) more than last year at this time, and 405 Bcf (+13.8%) above the 5-year average of 2,934 Bcf.

Natural Gas Trends:

September NYMEX: Closed trading Thursday at $2.674/Dth, up 5.5 cents from Wednesday’s close of $2.619/Dth. Over the last month, SEP-16 has traded as high as $2.911/Dth and as low as $2.523/Dth.

Seasonal Strips: This year’s winter strip (NOV16-MAR17) settled Thursday at $3.132/Dth, up 5.9 cents from a week prior. Next year’s summer strip (APR17-OCT17) settled Thursday’s trading at $2.969/Dth, up 1 cent from last week.

12 Month Strip: Settled Thursday at $2.988/Dth, down 3.8 cents from the month prior. As a comparison, the strip was trading one year ago at $2.940/Dth.

Summary:

While heat has dominated much of the country this summer,  and the season expected to conclude as the 3rd warmest since 1950, temperatures have moderated recently. The current 6-14 day forecast only shows above normal temperatures for the East Coast and Northwest, while the rest of the country is expected to experience cooler than normal weather for the same period of time.

Production has rebounded in August from the year-to-date lows set in July, and has been comfortably averaging above 72 Bcf/d so far this month. Natural gas fired electric generation levels continue to remain strong, reaching a new all time record high this month of 41.9 Bcf/d. With the peak of the cooling season now behind us, it would make sense for storage builds to strengthen for the remainder of the injection season, which runs through the end of October.

Even though this injections season has been dominated by weak injections and record high power generation levels, it seems the market has been overshadowed by storage levels. End-of-season projections still favor a 4.0+ Tcf scenario. With milder weather ahead, it will be interesting to see if natural gas prices will sustain at current levels amidst ample production and expectations of decreased demand from electric generation.

 

Natural Gas Market Update – 8/19/2016