Natural Gas Storage
Smaller Than Expected Storage Injection
The U.S. Energy Information Administration (EIA) reported an increase of 36 BCF this past week, 19% lower than the expected injection of 43 Bcf. The current storage levels are at 3,437 Bcf, which is 5.7% above last year and 8.9% above the 5-year historic average.
The slower than expected build-up of storage has pushed market prices up slightly, up to9.5¢ in October.
Weather Forecast: Entire Country to See Above Normal Temperatures Again
The National Oceanic and Atmospheric Administration is again predicting a high probability of above normal temperatures over their 3-month forecast for the entire country. In particular, the Northeast, Southeast, Arizona and New Mexico are predicted to have temperatures well above normal.
In September, states east of the Mississippi River are predicted to experience above normal temperatures, as well as California, Arizona, Nevada and parts of Oregon. The middle of the country should experience normal September temperatures.
Natural GasPrices See Small Up-Tick
October 2016 natural gas prices are hovering around $2.65 to $2.75/MMBTU range, showing a slight gain from recent trading sessions. The small price change is on the heels of a few events which could have spiked prices.For example, Hurricane Hermine had a small impact on oil and gas production and a $0.86 jump in October crude oil prices.The 12-month strip prices are buoying around the $3.10/MMBU level.
As summer comes to a close, natural gas demand will be tapering for the fall months.This is mainly due to the reduced need for air conditioning and its draw from natural gas supplied power generation. Moving into the winter season, we should focus our attentionon:
- Colder than normal winter temperatures and its impacts on storage reserves
- The end of hurricane season
- The increase natural gas exports
The newly built LNG plant in Louisiana and increased pipeline exports to Mexico have caused the EIA to predict that the U.S. will be a net exporter of natural gas in the second quarter of 2017. We will watch the domestic price impact of natural gas exports over the next few quarters.
Natural Gas Prices Remain Flat, but Starting to See More Volatility
The Bulls and the Bears appear to be split and holding prices somewhat flat. Factors supporting the bullish side are slowed NG production, lower rig counts, high imports and hotter than normal temperatures forecasted for the next few months. Supporting the Bearish side are low coal prices, cheap and abundant Canadian gas and abundant storage levels. With the bulls and bears seemingly split, prices have been moderately flat, but price volatility has increased.
The average price of natural gas for 2011-2015 was $3.49/MMBTU. The average price for 2016 is predicted to be $2.38/MMBTU and for 2017 predictions are at $3.09/MMBTU.Now is the time to lock in long term prices. While 2017 looks to be lower than the first half of this decade, prices do appear to be moving up and not down.