Natural Gas Storage Summary

For natural gas report week, January, 23, 2020, the EIA reported a net decrease in natural gas storage of 92 Bcf, in line with projections ranging from a withdrawal of 79 Bcf to a draw of 103 Bcf. Last year for the same week there was a withdrawal of 152 Bcf and the five-year average is a withdrawal of 194 Bcf.

Working gas in storage was 2,947 Bcf as of Friday, January 17th, 2020 per EIA estimates. Inventory was reported at 554 Bcf (23.2%) higher than last year for the same week and 251 Bcf (9.3%) more than the five-year average of 2,696 Bcf.

Natural Gas Market Recap

February NYMEX natural gas report January 23 2020
Settled Thursday at $1.926/Dth, up
2.1 cents from Wednesday’s close
at $1.905/Dth.
12 month strip for natural gas January 23 2020 report
Settled Thursday at $2.161/Dth, down 10.8 cents from last Thursday.
Seasonal Strips for natural gas January 23 2020 report
The winter strip settled Thursday at
$2.494/Dth, down 7.7 cents from
last Thursday. The summer strip
settled Thursday at $2.097/Dth,
down 11.0 cents from the prior
week.

Natural Gas Weekly - Three Things To Watch

Natural Gas Report – January 23, 2020

1. Fundamentals

Overall supply grew by 1% from last week. Average net imports from Canada increased by 62% in response to higher heating-related demand during the first half of the week, specifically in the Northeast and Midwest. The weather drove consumption up by 17% with residential/commercial up by 27% and power generation up by 15%. Industrial demand rose 3% while exports to Mexico fell by 7%. So far this withdrawal season, the average rate of withdrawal is 22% less than the five-year average. If the rate of withdrawal from storage matched the five-year average of 13.5 Bcf/d from now until March 31, storage inventory would be 1,948 Bcf which is 251 Bcf higher than the five-year average of 1,697 Bcf.

2. Prices

Henry Hub spot prices fell to $1.89/Dth Wednesday, the lowest January price since 1999. Prompt month and strip prices also fell across the report week as the market confronted national and global oversupply conditions made worse by stunted winter demand impacted by above-average temperatures.

3. A Look Ahead 

It was really just a matter of time. Prompt month prices broke the $2 mark this week, largely in response to excess supply and forecasts signaling warmer temperatures for the next two weeks. It’s good news for those of us who aren’t fans of winter and others who have been waiting to see how low natural gas prices can go. Not in either group? Not to worry, NOAA is also predicting above-average snowfall and average temperatures for February and March…at least in the Midwest.

Not ready to gamble on weather or the market when it comes to natural gas prices?

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Natural Gas Storage Summary

For natural gas report week, January 16, 2020, the EIA reported a net decrease in natural gas storage of 109 Bcf, exceeding projections ranging from a withdrawal of 87 Bcf to a draw of 106 Bcf. Last year for the same week there was a withdrawal of 82 Bcf and the five-year average is a withdrawal of 184 Bcf.

Working gas in storage was 3,039 Bcf as of Friday, January 10th, 2020 per EIA estimates. Inventory was reported at 494 Bcf (19.4%) higher than last year for the same week and 149 Bcf (5.2%) more than the five-year average of 2,890 Bcf.

Natural Gas Market Recap

Settled Thursday at $2.077/Dth
down 4.3 cents from Wednesday’s
close at $2.120/Dth.
Settled Thursday at $2.269/Dth,
down 6.0 cents from last Thursday.
The winter strip (FEB20-MAR20)
settled Thursday at $2.571/Dth,
down 2.5 cents from last Thursday.
The summer strip (APR20-OCT20)
settled Thursday at $2.207/Dth,
down 6.2 cents from the prior week.

Natural Gas Weekly - Three Things To Watch

Natural Gas Report – January 16, 2020

1. Fundamentals 

Overall natural gas demand dropped by 3% from last week with residential/commercial, power generation, and industrial declining 4%, 3%, and 1%, respectively. Exports to Mexico increased 5% while LNG exports declined slightly from last week. Total supply fell by 1% as production generally remained consistent and imports from Canada decreased by 25% on lower Midwest and Northeast demand.

Comparatively, residential/commercial is down 6.9 Bcf/d thus far into January 2020 compared to January last year. Production has averaged 92.1 Bcf/d for January 2020, up 4.3 Bcf/d from January 2019.

So far this withdrawal season, the average rate of withdrawal is 15% less than the five-year average. If the rate of withdrawal from storage matched the five-year average of 14.7 Bcf/d from now until March 31, storage inventory would be 1,846 Bcf on March 31 which is 149 Bcf higher than the five-year average of 1,697 Bcf.

 

2. Prices 

Despite a larger-than-expected storage draw posted Thursday, natural gas prices looked past short-term wintry weather to longer-term, above-average temperatures forecast through the end of January. Hours after the EIA posted their weekly storage numbers, NYMEX prompt month trading started to challenge the $2 mark. The Henry Hub spot price fell to $1.98/Dth Wednesday, the lowest spot price since April 2016 and the lowest spot price for Henry Hub in January trading since 1999. Elsewhere, spot prices remained a reflection of temperatures. Above-average temperatures put downward pressure on prices and areas of cold and snow generally brought increases, albeit temporary, in spot prices.

 

3. A Look Ahead 

The EIA’s most recent Short Term Energy Outlook provided two-year forecasts including expectations that natural gas production will average 94.7 Bcf/d through 2020 before leveling off at 94.1 Bcf/d in 2021. The EIA anticipates exports (both pipeline and LNG) will average 7.3 Bcf/d in 2020 and 8.9 Bcf/d in 2021, a 3.6 Bcf/d increase from 2019.

Power generation related demand is expected to remain steady, 37% in 2019, 38% in 2020, and 37% in 2021. The contribution from renewables is projected to grow from 17% in 2019 to 22% in 2021. Conversely, coal’s share of electricity generation is expected to fall from 24% in 2019 to 21% in 2021. Nuclear generation is forecasted to drop slightly to less than 20% by 2021, the result of reactor retirements.

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Natural Gas Storage Summary

For the natural gas report week, January 9, 2020, the EIA reported a net decrease in natural gas storage of 44 Bcf, near the low end of projections ranging from a withdrawal of 40 Bcf to a draw of 62 Bcf. Last year for the same week there was a withdrawal of 81 Bcf and the five-year average is a withdrawal of 156 Bcf.

Working gas in storage was 3,148 Bcf as of Friday, January 3rd, 2020 per EIA estimates. Inventory was reported at 521 Bcf (19.8%) higher than last year for the same week and 74 Bcf (2.4%) more than the five-year average of 3,074 Bcf.

Natural Gas Market Recap

February natural gas January 9 2020 nymex market graph.
February settled Thursday at
$2.166/Dth up 2.5 cents from Wednesday’s close at $2.141/Dth.
12 month strip natural gas January 9 2020 nymex market graph.
Settled Thursday at $2.329/Dth, up 3.9 cents from last Thursday.
Seasonal strips natural gas January 9 2020 nymex market graph.
The winter strip (FEB20-MAR20)
settled Thursday at $2.596/Dth, up 1.9 cents from last Thursday. The
summer strip (APR20-OCT20) settled Thursday at $2.269/Dth, up 4.4 cents from the prior week.

Natural Gas Weekly - Three Things To Watch

Natural Gas Report – January 9, 2020

1. Fundamentals

Overall consumption grew by 10% (from 84.8 Bcf/d to 93.5 Bcf/d) week-over-week, largely the result of typical winter temperatures. Heating demand led U.S. consumption in weekly growth as residential/commercial increased by 15%, followed by power generation (11%), and industrial (2%). Exports to Mexico increased 16% from the prior week. LNG exports also grew as 19 ships with a combined capacity of 68 Bcf departed the United States. Forecasts for LNG exports anticipate an average 8.25 Bcf/d of through January 2020 which nearly doubles 2018. That rate is expected to drop significantly into the latter half of 2020 as global oversupply slows demand.

 

2. Prices

2020 kicked off with Henry Hub spot prices at a three-year low. Overall in 2019, spot prices were among the lowest seen over the last three years, with Henry Hub averaging just $2.57/Dth in 2019 and projections centering around an average of $2.31/Dth in 2020. While analysts anticipate that markets may flirt with $2.00/Dth prices, they are quick to add such lows are not sustainable long-term and that the market will correct itself.

As another sign of a sluggish natural gas market, the rate at which oil trades compared to natural gas, recently reached 30-to-1. The five-year average is 19-to-1 whereas normal should be closer to 6-to-1. Fox business predicts the current oil-to-gas ratio imbalance may become more pronounced as average gas prices fall for a second consecutive year.

Either way, current prices may be a good buy in the event the second half of winter gets colder. Not sure what this means for you? Give us a call, we’re happy to help you evaluate your options.

 

3. A Look Back at 2019 

Production set new records in 2019, lifted by growth in the Permian, Appalachian, and Haynesville Basins and supported by added pipeline capacity. Even with low prices disincentivizing additional natural-gas directed drilling, especially in the latter half of 2019, substantial growth came from associated gas production which S&P notes accounts for nearly half of U.S. gas production. The lower prices led to increased consumption for power generation which likewise hit new records in 2019, most notably during the summer. Exports also broke records thanks to LNG. The EIA expects that the U.S. will be a net exporter of LNG through 2050.

 

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