December 17, 2018 – Natural Gas Intelligence
NatGas Storage Deficits, Price Volatility May Linger Past March as Coal ‘Safety Net’ Diminished
By: Jeremiah Shelor
Except under the lowest demand scenarios, natural gas inventories are on track to exit March below comparable year-ago and five-year-average levels, making shifts in weather all-important at a time of diminished gas-to-coal switching potential in the power stack, according to analysts.
A mild Christmas could assuage storage fears after hefty deficits helped prices break higher along the winter strip through the early part of the heating season. But significant upside risk remains heading into the new year.
Indeed, “the fate of the gas storage market is teetering on how cold or warm this winter will be, with the current deficit making the market especially susceptible to the upside,” RBN Energy LLC analyst Sheetal Nasta said.
As it stands, anything more than a milder winter could see the recent volatility spill over into the 2019 injection season. In a recent blog post, Nasta pegged end-March inventories near 1,130 Bcf, about 200 Bcf below the year-ago period and about 500 Bcf lower than the five-year average.
To reach the five-year average 1,630 Bcf by end-March, the market would need to limit withdrawals to just 11 Bcf/d for the December-March period, less than the 12 Bcf/d withdrawn during the same stretch in the mild 2015/16 winter, according to Nasta, who modeled several scenarios that could play out this winter, isolating for shifts in demand from the weather-sensitive residential/commercial, power burn and industrial sectors.
Starting from a baseline of 2,991 Bcf reported by the Energy Information Administration (EIA) for the week ended Nov. 30, this “implies the market would have to withdraw no more than 1,638 Bcf total (the equivalent of 13.7 Bcf/d) in the 120 days between Dec. 1, 2018, and March 30, 2019, in order to get to last year’s benchmark,” Nasta said. “Over the past five years, the lowest daily average withdrawal over that period was 12 Bcf/d in 2015-16, when the market experienced a relatively mild winter.
Read the full article here: https://www.naturalgasintel.com/articles/116817-natgas-storage-deficits-price-volatility-may-linger-past-march-as-coal-safety-net-diminished
