Nat Gas Market Update

Natural Gas Market Update – 02/27/2017

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Storage Report – 02/23/2017

Thursday’s storage report cited a withdrawal of 89 Bcf, slightly higher than expectations of an 85 Bcf withdrawal. As a comparison, last year’s withdrawal for the same week was 131 Bcf, and the 5-year average reduction is 158 Bcf.

Working gas in storage was 2,356 Bcf as of Friday, February 17th, 2017, according to EIA estimates. Inventory was reported at 261 Bcf (-10.0%) less than last year at this time, and 156 Bcf (+7.1%) above the 5-year average of 2,200 Bcf.

Natural Gas Trends:

March NYMEX: Moved off the board Friday, February 24th, settling the month at $2.627/Dth.  As a comparison, March 2016 NYMEX closed at $1.711/Dth, and the 3-year average settle price for March is $2.411/Dth. However, down 76.4 cents from February 2017’s NYMEX settlement of $3.391/Dth.

April NYMEX: Trading closed Thursday at $2.749/Dth, up 4.8 cents from Wednesday’s close of $2.701/Dth. Over the last month, APR17 has traded as high as $3.499/Dth and as low as $2.641/Dth.

Seasonal Strips:

The current summer strip (APR17-OCT17) settled Thursday’s trading at $2.907/Dth, down 21.5 cents from a week ago. This coming year’s winter strip (NOV17-MAR18) settled Thursday at $3.177/Dth down 20.2 cents from last week.

12 Month Strip: Settled Thursday at $2.973/Dth, down 40.0 cents from the month prior. As a comparison, the strip was trading one year ago at $2.144/Dth.

Summary:

Dozens of record temperature highs were broken throughout the country in the past week, with daily highs coming in 20-40 degrees above average for the eastern two thirds of the country. Hopes for any consistent cold, to end winter have most certainly diminished, with weather models currently favoring an extended warmer than normal scenario through March.

Natural gas rig count continues to raise, now up 51.5% year-over-year. Supply is waiting to catch up to the increase of rigs, as it is currently down 3.9 Bcf/d y-o-y, while consumption is significantly down (-11.4 Bcf/d y-o-y).

Unseasonably warm weather has dominated much of 2017, reducing demand and cutting withdrawals 17% below the 5-year average. These fundamentals have weighed heavy on natural gas prices, which have slowly retreated across the board to near six month lows. Prompt month gas has sharply fallen 37.7 cents just from last Wednesday’s (02/15/17) high of $2.994/Dth. Long term prices have also shown weakness, as calendar strip prices out through 2025 are all currently trading sub $3.00/Dth.

 

Natural Gas Market Update – 02/17/2017

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Storage Report – 02/17/2017

Thursday’s storage report cited a withdrawal of 114 Bcf, less than expectations of a 128 Bcf withdrawal. As a comparison, last year’s withdrawal for the same week was 136 Bcf, and the 5-year average reduction is 156 Bcf.

Working gas in storage was 2,445 Bcf as of Friday, February 10th, 2017, according to EIA estimates. Inventory was reported at 303 Bcf (-11.0%) less than last year at this time, and 87 Bcf (3.7%) above the 5-year average of 2,358 Bcf.

Natural Gas Trends:

March NYMEX: Trading closed Thursday at $2.854/Dth, down 7.1 cents from Wednesday’s close of $2.925. Over the last month, MAR17 has traded as high as $3.498/Dth and as low as $2.831/Dth.

Seasonal Strips:

This current summer strip (APR17-OCT17) settled Thursday’s trading at $3.122/Dth, down 21.3 cents from a week ago. This coming year’s winter strip (NOV17-MAR18) settled Thursday at $3.379/Dth down 19.3 from last week.

12 Month Strip: Settled Thursday at $3.187/Dth, down 30.9 cents from the month prior. As a comparison, the strip was trading one year ago at $2.267/Dth.

Summary:

The natural gas market has been under pressure over the past few days, as cold air exits the Northeast, and spring like temperatures expected to move in through Presidents Day. Most of the country will see temperatures well above average for mid-February (15-30 degrees above). There are some indications that the warmth may even continue through most of next week.

With the weak demand for natural gas, March NYMEX finally broke through the $3.00 support level on Monday, and has continued to steadily tumble since. The bearish storage report sank the prompt month price an additional 8 cents on Thursday. March 2017 may not roll off the board at last year’s settlement of $1.711/Dth, but if the warmth continues, the floor on natural gas prices may continue to fall.

 

Natural Gas Market Update – 12/09/2016

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Storage Report – 11/10/2016

Thursday’s storage report cited a withdrawal of 42 Bcf, higher than expectations of a 35 Bcf build.

As a comparison, last year’s withdrawal for the same week was 69 Bcf, and the 5-year average is a 76 Bcf decline.

Working gas in storage was 3,953 Bcf as of Friday, December 2nd, 2016, according to EIA estimates. Inventory was reported at 51 Bcf (+1.3%) more than last year at this time, and 254 Bcf (+6.9%) above the 5-year average of 3,699 Bcf.

Natural Gas Trends:

December NYMEX: Moved off the board Monday, November 28th, settling the month at $3.232/Dth. As a comparison, December 2015 NYMEX closed at $2.206/Dth, and the 3-year average settle price for January is $3.240/Dth.

January NYMEX: Closed trading Thursday at $3.695/Dth, up 9.2 cents on the day. Over the last month, JAN17 has traded as high as $3.775/Dth and as low as $2.772/Dth

Seasonal Strips: This year’s remaining winter strip (JAN16-MAR17) settled last Thursday at $3.547/Dth up 6.1 cents from last week. Next year’s summer strip (APR17-OCT17) settled Thursday’s trading at $3.413/Dth, up 9.5 cents from a week prior.

12 Month Strip: Settled Thursday at $3.492/Dth, up 63.7 cents from a month prior. As a comparison, the strip was trading one year ago at $2.347/Dth.

Summary:

After a record warm fall, it seems as though winter has arrived. An arctic blast is currently migrating across the country, but a second one next week is expected to be even colder. Temperatures are foretasted to be 30 degrees colder than average for much of the continental U.S. over the next two weeks, increasing demand for this period. However there is some debate whether the colder than normal temperatures will stay beyond the next two weeks.

Natural gas prices have recovered from lows in November and this week have surged to their highest levels since December of 2014. The market has shown a lot of volatility this week with the cold weather ahead. After posting a five day high on Tuesday of $3.73/Dth, the market closed down 13 cents Wednesday to $3.603/Dth, and then rallied again Thursday back up to $3.695/Dth. Given the expected cold circumstances over the next couple of weeks, analysts are expecting withdrawals of 130 Bcf next week, and 230 Bcf the following week. If these forecasts prove to be true, storage levels will likely erase surplus levels to last year, and possibly eliminate away even the 5-year surplus, that we have seen most of this year. The psychological impact of eliminating the surplus position could keep upward pressure on the near term prices.

 

Natural Gas Market Update – 11/11/2016

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Storage Report – 11/10/2016

Thursday’s storage report cited an injection of 54 Bcf, slightly higher than expectations of a 50 Bcf build. As a comparison, last year’s injection for the same week was 55 Bcf, and the 5-year average is 38 Bcf.

Working gas in storage was 4,017 Bcf as of Friday, October 28th, 2016, according to EIA estimates. Inventory was reported at 47 Bcf (+1.2%) more than last year at this time, and 189 Bcf (+4.9%) above the 5-year average of 3,828 Bcf.

Natural Gas Trends:

December NYMEX: Trading closed Thursday at $2.632/Dth, down 5.8 cents from Wednesday’s close of $2.690/Dth. Over the last month, DEC-16 has traded as high as $3.556/Dth and as low as $2.546/Dth.

Seasonal Strips: This year’s remaining winter strip (DEC16-MAR17) settled Thursday at $3.122/Dth, down 6.3 cents from a week prior. Next year’s summer strip (APR17-OCT17) settled Thursday at $2.877/Dth, down 7.9 cents from last week.

12 Month Strip: Settled Thursday at $2.855/Dth, down 47.4 cents from the month prior. As a comparison, the strip was trading one year ago at $2.554/Dth.

Summary:

A cold shot for the Northeast and Great Lakes regions is expected to take place between now and Tuesday. Temperatures in the regions will fall as low as the 20’s and 30’s, which creates the potential for the first snowfall of the season. The cold air blast will likely bring the coldest temperatures for these regions, so far this year, but is expected to only last about a day and a half to two days, once it hits. A return to above average temperatures is foretasted by mid week. Once again, the 6-14 day outlook favors warmer than normal temperatures for almost the entire continental U.S.

Current weather models show November to end with temperatures that are 18% higher than the 10 year average. A warmer than normal October and start to November has already driven market bulls to sell off long positions, which has plummeted the natural gas market over the past three weeks. November is typically the first month of the heating season, but the mild weather has limited demand allowing for additional injections beyond October 31st, the traditional end to the injection season. This week’s injection has put inventory at 4,017 Bcf, officially surpassing the previous record of 4,009 Bcf, set last year. Until consistent cold weather and increased natural gas demand occurs, natural gas prices would be expected to remain under pressure.

 

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 – 9/9/2016

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Storage Report – 9/8/2016

Thursday’s storage report cited an injection of 36 Bcf, less than expectations of a 40 Bcf build.

As a comparison, last year’s injection for the same week was 78 Bcf, and the 5-year average is also a 64 Bcf injection.

Working gas in storage was 3,437 Bcf as of Friday, September 2nd, 2016, according to EIA estimates. Inventory was reported at 196 Bcf (+6.0%) more than last year at this time, and 306 Bcf (+9.8%) above the 5-year average of 3,131 Bcf.

Natural Gas Trends:

September NYMEX: September 2016 moved off the board Monday, August 29th, settling the month at $2.853/Dth. As a comparison, September 2015 NYMEX closed at $2.638/Dth, and the 3-year average settle price for September is $3.149/Dth.

October NYMEX: Closed trading Thursday at $2.806/Dth, up 13 cents from Wednesday’s close of $2.676/Dth. Over the last month, OCT-16 has traded as high as $2.949/Dth and as low as $2.584/Dth.

Seasonal Strips: This year’s winter strip (NOV16-MAR17) settled last Thursday at $3.165/Dth up 2.1 cents from last week. Next year’s summer strip (APR17-OCT17) settled Thursday’s trading at $3.007/Dth, flat from a week prior.

12 Month Strip: Settled Thursday at $3.053/Dth, down 1 cent from the month prior. As a comparison, the strip was trading one year ago at $3.011/Dth.

Summary:

According to weather models, this summer has concluded as the hottest on record. The summer heat is expected to linger on into the middle of September. Cooler temperatures are forecasted for the Plains and Midwest Regions toward the end of the month.

August saw natural gas production ramp back up to levels as high as 73 Bcf/d. Tropical storms over the past week have interrupted production in the gulf, and output has fallen slightly since, and is now averaging closer to 72.6 Bcf/d. The storage report this week, once again for the 18th consecutive time, has cited an injection that was less than both a year ago and the 5 year average. Shockingly enough, storage is still on pace to reach north of 4.0 Tcf, which would be close to a new all-time record.

Natural gas prices have pulled back slightly since hitting highs ahead of the Labor Day weekend. We have passed the peak of the cooling season, and moderating temperatures could put some added downward pressure on prices. However, the EIA expects natural gas prices to continue to trend up the rest of the year and into next, with prices nearing $4.00/Dth by the end of 2017.

 

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.