Highlights of the Natural Gas Summary and Outlook for February 13, 2015 follow. The full report is available at the link below.
Natural Gas Summary and Outlook
- Price Action: The March contract rose 22.5 cents (8.7%) to $2.804 on a 31.2 cent range.
- Price Outlook: Although the fundamental supply/demand balance remains bearish, prices did not forge another low and established a new high instead. Prices were driven by bullish weather forecasts with nearly 100 bcf of additional demand added as a result of colder weather forecasts during the week. The market did back off from the highs and next week will clearly be driven by the temperature outlook. The CFTC data revealed another increase in the managed money net short speculative position. This is now the largest speculative net short position since January 2012. Total open interest as of February 10 increased to 3.95 million contracts. The option related position also rose. CME futures aggregated open interest fell to 1.006 million as of February 12.
- Weekly Storage: US working gas storage for the week ending February 6 indicated a draw of 160 bcf. Thus total working gas inventories fell to 2,268 bcf. Current inventories rise 575 bcf (34.0%) above last year while trailing the 5 year average by 25 bcf (1.1%).
- Storage Outlook: Temperature forecasts this week did suggest much cooler temperatures and thus larger draws. Still current inventories are the 2nd highest on record for early February and remain on pace to rival the 2012 yearly storage surplus. Updated weather forecasts did suggest much higher demand levels and cooler weather could continue to lower end of season storage projections.
- Supply Trends: Total supply rose 1.0 bcf/d to 77.5 bcf/d. US production, Canadian and LNG imports all rose while Mexican exports fell. The US Baker Hughes rig count fell 98 as both oil and natural gas activity declined. The total US rig count now stands at 1,358. The Canadian rig count rose 1 to 382. Thus, the total North American rig count fell 97 to 1,740 and now trails last year by 648. The higher efficiency US horizontal rig count fell 63 to 1,025 and falls 158 below last year. Currently, we estimate 64 total Marcellus rigs are required to maintain natural gas output. There are currently 69 total rigs operating in the Marcellus. This is not a static number and estimates will be updated monthly. We will rotate between the Marcellus, Eagle Ford, Permian, Haynesville and Utica.
- Demand Trends: Total demand rose 10.3 bcf/d to 100.2 bcf/d. All sectors were higher with R&C again leading the way. Electricity demand rose 1,283 gigawatt-hrs to 79,150, which trails last year by 4,323 (5.2%) while exceeding the 5 year average by 7 (0.0%). Although temperature adjusted demand is stout, the supply/demand balance as measured by the weekly EIA storage report remains bearish with supply gains still larger.
- Other Factors: The S&P 500 established a new closing high.
- Our proprietary heating index continues to remain in 3rd place with a forecast through February 27. The total index stands at 2,302 compared to 2,548 for 2013/14, 2,256 for 2012/13, 2,178 for 2011/12 and 2,529 for 2010/11.
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.
