The Energy Information Administration (EIA) reported that a net 55 Bcf of natural gas was injected into storage for the week ended September 27 in the U.S. Lower 48. This was roughly in line with market expectations, as the nine predictions to the Bloomberg survey had a median of 57 Bcf. The gas storage surplus to the 5-year average (blue shaded area in chart below) has now dropped to its lowest level since January as low production relative to recent years has led to small storage builds in the injection season. All five of the EIA regions still have a storage surplus to the 5-year average, although storage in the East is now less than 4% above the 5-year norm.
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- Blog
Hazy Shade of Winter - Natural Gas Market Balance, Prices Hinge on Cold Winter
Just a month ago, the CME/NYMEX Henry Hub prompt natural gas futures contract was trading at a six-month high of $3.21/MMBtu (on November 10), and the U.S. gas storage inventory was at a three-year low, setting the stage for a bullish winter — assuming normal wintry weather. Since then, the prompt-month contract has tumbled about 50 cents to a settle of $2.715/MMBtu as of this Wednesday. In that time, temperatures fell across the country and seasonal demand for heating homes and businesses kicked in, and LNG exports ticked up slightly. But supply also grew by a lot, with natural gas production surging by 1.0 Bcf/d since then to a new record high of 76.9 Bcf/d just this past Monday. How did the fundamentals shake out in November, and what do current fundamentals mean for the balance of winter? Today, we reconcile these latest shifts in gas market fundamentals.
- Blog
The Long and Winding Road - U.S. Natural Gas Storage Whipsaws Prices - Again
The CME/NYMEX Henry Hub January contract settled yesterday at $3.54/MMBtu, about 30.8 cents (~10%) above where the December contract expired ($3.232) and 77.6 cents (28%) higher than where November settled ($2.764). The natural gas winter withdrawal season is officially underway—it’s a lot colder and gas demand has spiked. But this week also marks another key bullish threshold: as today’s Energy Information Administration (EIA) storage report will likely show, the U.S. natural gas inventory has fallen below the prior year’s levels for the first time in two years (since early December 2014). That’s in sharp contrast to where the inventory started the injection season in April—more than 1,000 Bcf higher compared to April 2015. Moreover, we expect the emerging deficit to grow substantially over the next several weeks. Today we look at the supply-demand fundamentals driving this shift and what it means for the winter gas market.
- Blog
Time Is (Not) On My Side - Natural Gas Futures Plunge to Record June Lows; Why Now?
The CME/NYMEX Henry Hub prompt contract settled at $1.482/MMBtu yesterday, down 11.5 cents (7%) from the previous day and the lowest settle that the market has ever seen during June trading. That’s also a 33-cent (18%) drop from just two weeks ago when prompt futures were around $1.80/MMBtu. The immediate rationale is the larger-than-expected and larger-than-normal storage build reported by the Energy Information Administration yesterday. But current price levels are also indicative of bigger problems looming for the gas market, namely that while gas production is down, total demand, including exports, has been exceptionally weak too. As a result, by mid-July, the storage inventory appears likely to reach record highs for that time of year — record highs that may well persist through the end of injection season in early November unless there is a substantial correction in the gas supply-demand balance. Moreover, it’s looking less and less likely that relief will come from the demand side. Today, we look at the drivers behind the latest gas market meltdown and implications for the balance of injection season.
