Highlights of the Natural Gas Summary and Outlook for the week ending July 7, 2017 follow. The full report is available at the link below.
Natural Gas Summary and Outlook
- Price Action: The August contract fell 17.1 cents (5.6%) to $2.864 on a 21.8 cent range.
- Price Outlook: After posting a new weekly high last week, the market moved lower after the week started with bearish weather forecasts and then the EIA reported a larger than expected storage report. However, the storage report this week is expected to expand the yearly storage deficit and reduce the surplus to the 5-year average. These factors have typically been supportive to price. CFTC data was not updated due to the July 4th Holiday. Aggregated CME futures open interest rose to 1.361 million as of July 7th.
- Weekly Storage: US working gas storage for the week ending June 30 indicated a working gas storage injection of 72 bcf. Working gas inventories rose to 2,888 bcf. Current inventories fall (291) bcf (9.2%) below last year while surpassing the 5-year average by 192 bcf (7.1%).
- Storage Outlook: Our EIA weekly storage estimate was mathematically 6 bcf smaller than the actual EIA implied flow and is above the upper end of our tolerance range. The 5-week summation of our error fell to 3 bcf and is well within our tolerance. The EIA has reported a net implied flow of 363 bcf over the last 5 weeks compared to our estimated 360 bcf. Our forecast for early November inventories is now 3,805 bcf. The forecasts use a 10-year rolling temperature profile past the 15-day forecast. Above normal national temperatures are considered bullish.
- Supply Trends: Total supply fell (0.6) bcf/d to 71.1 bcf/d. US production rose. Canadian imports were lower and Mexican exports were higher. LNG imports and exports were unchanged. The US Baker Hughes rig count rose 12 with both oil and natural gas activity higher. The total US rig count now stands at 952. The Canadian rig count fell 14 to 175. Thus, the total North American rig count fell 2 to 1,127 and now exceeds last year by 606. The higher efficiency US horizontal rig count rose 12 to 804 and rises 461 above last year.
- Demand Trends: Total demand fell (1.8) bcf/d to 61.4 bcf/d. R&C and industrial demand were higher, but were offset by lower power demand. Electricity demand fell (4,907) gigawatt-hrs to 82,260 which trails last year by (3,962) (4.6%) and the 5-year average by (2,996) (3.5%).
- Nuclear Generation: Nuclear generation rose 514 MW in the reference week to 91,927 MW. This is 2,090 MW higher than last year and (1,055) MW lower than the 5-year average. Recent output was at 93,675 MW.
The cooling season has begun. With a forecast through July 21, the 2017 total cooling index is at 2,462 compared to 2,848 for 2016, 1,746 for 2015, 1,572 for 2014, 2,510 for 2013, 4,050 for 2012 and 2,802 bcf for 2011.
