Highlights of the Natural Gas Summary and Outlook for September 4, 2015 follow. The full report is available at the link below.
Natural Gas Summary and Outlook
- Price Action: The October contract fell 6.0 cents (2.2%) to $2.655 on a 10.3 cent range.
- Price Outlook: The weekly price ranges remain incredibly small. However, natural gas was unable to continue the streak lower with a new high made rather than the expected new low. Natural gas prices have not moved in the same direction for more than two weeks since May. The tight ranges suggest both a new high and low in coming weeks. The managed money net short position pulled back to just over 68,000 as total delta adjusted open interest fell to 3.188 million as of September 1. This is the lowest open interest in the combined data series dating back to December 2009. Aggregated CME futures open interest rose to 917,000 as of September 4.
- Weekly Storage: US working gas storage for the week ending August 28 indicated a net injection of 94 bcf that was accompanied by an 8 bcf reclassification. Thus total working gas inventories rose to 3,193 bcf. Current inventories rise 484 bcf (17.9%) above last year while surpassing the 5 year average by 120 bcf (3.9%).
- Storage Outlook: Our EIA weekly storage miss was a more comfortable 1 bcf even as the 5 week summation error remained at just 5 bcf. For a 5 week period, that is within our tolerance and inventories are now expected to reach just over 4,000 bcf in November. Although the weekly storage volatility remains concerning, the 5 week outlook is more stable.
- Supply Trends: Total supply fell 0.2 bcf/d to 75.1 bcf/d. US production rose. Canadian imports fell. LNG imports and Mexican exports were unchanged. The US Baker Hughes rig count fell 13 as oil activity dropped with natural gas unchanged. The total US rig count now stands at 864. The Canadian rig count fell 9 and now stands at 187. Thus, the total North American rig count fell 22 to 1,051 and now trails last year by 1,288. This is an increase in the yearly deficit compared to last week. This is largest yearly deficit since August 21, 2009. The higher efficiency US horizontal rig count fell 13 to 659 and falls 674 below last year. The EIA Monthly Natural Gas Report indicated a surprising increasing in June natural gas output. This was in contrast to US pipeline data suggesting lower output.
- Demand Trends: Total demand fell 2.7 bcf/d to 63.5 bcf/d. R&C was higher. Other sectors were all lower. Electricity demand fell 4,154 gigawatt-hrs to 83,468 which trails last year by 3,559 (4.1%) and the 5 year average by 4,517 (5.1%). The EIA Monthly Natural Gas Report indicated demand established another new monthly record as June 2015 demand exceeded the previous June 2012 record by 2 bcf/d.
- Other Factors: Nuclear generation rose 430 MW in the reference week to 96,475 MW. This is 1,135 MW higher than last year and 1,408 MW higher than the 5 year average. Recent output was nearly 97,000 MW.
With a forecast through September 18, the 2015 total cooling index is still increasing, but at a much slower pace. The current index is at 4,047 compared to 3,345 for 2014, 4,769 for 2013, 7,091 for 2012 and 6,530 for 2011.
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