Highlights of the Natural Gas Summary and Outlook for the week ending March 3, 2017 follow. The full report is available at the link below.
Natural Gas Summary and Outlook
- Price Action: The now prompt April contract rose 4.0 cents (1.4%) to $2.827 on an 18.7 cent range.
- Price Outlook: Prices rebounded after 5 consecutive weeks lower and posted a new weekly high, in typical historic fashion of posting either a new weekly high or low. Although weather remains bearish, the last three days of the week did see less bearish weather forecasts while only 11 daily weather updates have been considered bullish in 2017. This week’s updated weather forecast added 42 bcf to weather only storage projections as normal heating demand remains non-existent. Weather updates have added over 750 bcf to storage projections in 2017. CFTC data indicated another reduction in the managed money net long position as both shorts and longs added. Shorts have added over 53,000 contracts since the end of January. Total open interest fell to 3.628 million as of February 28. Aggregated CME futures open interest rose to 1.385 million as of March 3.
- Weekly Storage: US working gas storage for the week ending February 24 indicated the first ever February build of +7 bcf that lifted working gas inventories to 2,363 bcf. Current inventories fall (173) bcf (6.8%) below last year while surpassing the 5-year average by +296 bcf (14.3%).
- Storage Outlook: Our EIA weekly storage estimate was mathematically 5 bcf smaller than the actual EIA report and is right at our tolerance range. The 5-week summation of our error fell to 2 bcf and is within our tolerance. The EIA has reported a net implied flow of (430) bcf over the last 5 weeks compared to our estimated (432) bcf. Our estimation for early April inventories is 2,193 bcf. This forecast continues to rise as temperature forecasts remain well above normal. The forecasts use a 10-year rolling temperature profile past the 15-day forecast. Above normal national temperatures are bearish until mid-May.
- Supply Trends: Total supply fell (0.7) to 70.7 bcf/d. US production and LNG exports rose. Canadian and LNG imports and Mexican exports fell. The US Baker Hughes rig count rose 2 as oil activity rose while natural gas slipped. The total US rig count now stands at 756. The Canadian rig count fell 6 to 335. Thus, the total North American rig count fell 4 to 1,091 and now exceeds last year by 473. The higher efficiency US horizontal rig count rose 9 to 633 and rises 244 above last year.
- Demand Trends: Total demand fell (12.1) bcf/d to 70.4 bcf/d. R&C demand led all sectors lower. Electricity demand fell 3,991 gigawatt-hrs to 68,347 which trails last year by 3,545 (4.9%) and trails the 5-year average by 8,582 (11.2%).
- Other Factors: Nuclear generation fell 1,034 MW in the reference week to 90,365 MW. This is 385 MW higher than last year and 2,217 higher than the 5-year average. Recent output is near 87,750 MW..
The 2016/17 heating season is entering the final month of winter. With a forecast through March 17, the 2016/17 total heating index is at 2,057 compared to 2,103 for 2015/16, 2,609 for 2014/15, 2,867 for 2013/14, 2,598 for 2012/13 and 2,399 for 2011/12 and 2,806 bcf for 2010/11.
