July 10, 2018 – Natural Gas Intelligence
Natural Gas Futures Bears in Control Thanks to Production Growth; SoCal Retreats
By: Jeremiah Shelor
Bears tightened their grip on the natural gas futures market Tuesday, sending prices lower as production continues to overshadow summer heat and storage deficits. Spot prices backed off Monday’s gains, including sharp declines in California and the Northeast coinciding with forecasts for less intense heat; the NGI National Spot Gas Average dropped 8 cents to $2.66/MMBtu…
Read the full article here: http://www.naturalgasintel.com/articles/115010-natural-gas-futures-bears-in-control-thanks-to-production-growth-socal-retreats
Analysts continue to point to the seemingly unstoppable growth of supply as a primary force applying downward pressure to futures.
RBN Energy LLC analyst Sheetal Nasta on Tuesday highlighted a rapid 1.5 Bcf/d surge in Lower 48 natural gas production over the final three weeks of June to help explain why prices have been heading lower as of late despite a large storage deficit to year-ago and five-year average levels that has continued well into the refill season.
“It’s no surprise that Lower 48 production has been on a tear lately” given capacity expansions in the Northeast and high rig counts, Nasta said. “What has taken the market by surprise, however, is the abruptness and sheer strength with which production has surged in just the past couple of weeks.”
RBN’s data shows production starting the year at 76.3 Bcf/d, down from December 2017. Production climbed in February and March to near 79 Bcf/d before growth stalled, according to Nasta, with output hovering around 79 Bcf/d between March and June.
“It wasn’t until the second half of June that output shifted into high gear,” she said. “If we compare average volumes in the week ended June 7, versus the week ended June 28, we see that total Lower 48 dry gas production zoomed higher by about 1.5 Bcf/d in that time to 81.8 Bcf/d by June 30, with the bulk of those gains occurring in the last week of the month.
“The production gains have continued into July,” with recent data showing volumes hitting a new high at 82.2 Bcf/d over the weekend. “That’s a whopping 10 Bcf/d higher than this time last year. It’s no wonder that Henry Hub futures, which touched the $3/MMBtu mark in late June, have whimpered back 15 cents or so since then...”
Nasta said a number of regions posted output gains from early to late June to drive this period of rapid growth, including the usual players in the Northeast and Texas, along with output growth from the Rockies, the Haynesville Shale and offshore Gulf of Mexico.
