Highlights of the Natural Gas Summary and Outlook for September 3, 2012 follow. The full report is available at the link below.
Natural Gas Summary and Outlook
- Price Action: Prices rose as Hurricane Isaac shut in production across the Gulf Coast. Prices basis the now prompt October contract rose 6.5 cents (2.4%) to $2.799 on a 19.8-cent range.
- Price Outlook: Prices established another new weekly low and have now recorded a new low 5 weeks in a row. Thus 18 weeks since 2000 have witnessed exactly 5 weeks in a row of a new weekly low. Of those, just 9 have seen another new low. The string of new weekly lows may come to an end as supply slowly returns and the next storage injection is likely to be very small. Although Isaac never achieved the wind velocity forecast, it was large and the slow moving nature resulted in more supply disruption than initially anticipated. However, reports thus far indicate little infrastructure damage and supply should return in the coming week. While the next storage injection is likely to be quite small due to the supply loss, the implications of the 66 BCF injection reinforces the bearish implications of last week and future weeks are now forecast to rise substantially. CFTC data indicated a small drop in the speculative net long position. Total net length has been reduced by over 50,000 contracts since late July. Total open interest dropped to just over 5.1 million contracts as of August 28. With what seems to be little infrastructure damage and projected increasing injections, further long liquidation could lead to price weakness in coming weeks.
- Weekly Storage: US working gas storage rose 66 BCF for the week ending August 24. Current inventory levels of 3,374 BCF now rise 413 BCF (13.9%) above last year while surpassing the 5 year average by 364 BCF (12.1%). The build was the first larger than last year and the 5 year average since late April.
- Storage Outlook: The build reinforced the bearish temperature adjusted implications of last week’s 47 BCF injection. Although the next week will witness a small injection due to Isaac’s supply disruptions, future weeks are likely to see a dramatic increase in injections.
- Supply Trends: Total supply rose 0.1 BCF/D to 68.4 BCF/D. Increased US production was again offset by lower imports with exports little changed. The US Baker Hughes rig count resumed the 2012 trend with increased oil exploration more than offset by reduced natural gas activity. Combined with lower Canadian activity, the total North American rig count fell 22 and at 2,210 now trails last year by 275. The higher efficiency US horizontal rig count fell 10 and at 1,149 remains just 13 higher YOY.
- Demand Trends: Total demand fell 3.4 BCF/D to 57.8 BCF/D. Lower power demand again more than offset increased R&C and industrial consumption. Electricity demand fell 4,060 gigawatt-hrs to 82,356 which trails last year by 7,476 (8.3%) and the 5 year average by 6,607 (7.4%). Demand has now peaked and unlikely to reach recent levels until late October.
- Other Factors: The S&P 500 index again slipped as another round of Fed easing does not appear immediate.
Each business day RBN Energy posts a Blog or Markets entry covering some aspect of energy market behavior. Receive the morning RBN Energy email by simply providing your email address – click here. |
