Natural Gas Market Update – 10/7/2016

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Storage Report – 10/6/2016

Thursday’s storage report cited an injection of 80 Bcf, higher than expectations of a 72 Bcf build. As a comparison, last year’s injection for the same week was 96 Bcf, and the 5-year average is 95 Bcf.

Working gas in storage was 3,680 Bcf as of Friday, September 30th, 2016, according to EIA estimates. Inventory was reported at 74 Bcf (+2.1%) more than last year at this time, and 205 Bcf (+5.9%) above the 5-year average of 3,475 Bcf.

Natural Gas Trends:

November NYMEX: Trading closed Thursday at $3.049/Dth, up $0.008 from Wednesday’s close of $3.041/Dth. The market rally continued Firday. As of this writing Novmeber NYMEX is trading up an additional 12 cents. Over the last month, NOV-16 has traded as high as $3.218/Dth and as low as $2.802/Dth.

Seasonal Strips: This year’s winter strip (NOV16-MAR17) settled Thursday at $3.305/Dth, up 11.3 cents from a week prior. Next year’s summer strip (APR17-OCT17) settled Thursday at $3.125/Dth, up 10.3 cents from last week.

12 Month Strip: Settled Thursday at $3.200/Dth, up 20.2 cents from the month prior. As a comparison, the strip was trading one year ago at $2.728/Dth.

Summary:

Widespread warmer than normal weather is expected for the continental United States over the next two weeks, a key factor in the recent run up in short term gas prices. Hurricane season has come in with a bang. Hurricane Matthew has inhabited Florida over night, and is expected to make its way into the Carolinas this weekend. The impact will be felt through lessened demand for natural gas and electricity as it makes its way up the Atlantic coast affecting residents and businesses in the process.

The storage surplus continues to narrow year-over-year, now just a mere +74 Bcf (+2.1%). We have begun to see rigs come back online, but production from them may not materialize for a few weeks. Last week production declined to 69.47 Bcf/d, down 2%. Natural gas demand also fell by 4% w-o-w, driven largely by a 14% decline in electric generation.

Yesterday’s storage report cited the second largest injection this season, but it still trails last year’s mark and the 5-year average. The 2016 refill season will likely conclude as the second only injection season not to post a triple digit build. Initially the market fell 5.6 cents Thursday, in reaction to the report, but by end of day rebounded 8.1 cents to settle up on the day. Weather related price volatility will likely continue with winter soon approaching.

 

Natural Gas Market Update – 10/7/2016