April 2, 2018 – Natural Gas Intelligence
Natural Gas Production Weighs on Bidweek Prices as Market Takes Stock of Winter
By: Jeremiah Shelor
A hefty storage deficit combined with near-record production had April natural gas bidweek traders taking stock of the market’s supply and demand balance on the cusp of injection season; the NGI National Bidweek Average shaved off 7 cents month/month to $2.36/MMBtu.…
Read the full article here: http://www.naturalgasintel.com/articles/113889-natural-gas-production-weighs-on-bidweek-prices-as-market-takes-stock-of-winter
…RBN Energy LLC analyst Sheetal Nasta said in a recent note that even with an expanding storage deficit the prompt month contract has “struggled to hold onto the $3/MMBtu level it started the season with in mid-November, and, in fact, has retreated back to an average near $2.70 in the past couple months - about 25 cents under where it traded a year ago.”
A year-on-year comparison showed the natural gas market about 1.7 Bcf/d tighter, with growth in liquefied natural gas exports and higher residential/commercial (res/com) demand helping to drive a 9.1 Bcf/d year/year increase in demand for winter 2017/18, according to Nasta. This comes as growth from the Marcellus and Utica shales has seen production “average a whopping 6.8 Bcf/d higher than the previous winter” to drive a 7.4 Bcf/d year/year increase in cumulative supply.
“There is a big caveat to that winter-on-winter comparison, which is that the weather in winter 2016/17 was extremely mild,” Nasta said.
Swapping in five-year average res/com demand levels in the same comparison swings the net supply/demand balance from 1.7 Bcf/d tighter to 0.7 Bcf/d looser year/year, the RBN analysis shows.
While April cold could extend the withdrawal season a while longer, “with the coldest months of the winter behind us, overall demand is expected to trend lower from here,” Nasta said. “Additionally, rig counts, producers’ drilling plans and pipeline expansion plans -- including the Rover Pipeline completion - all point to still more production growth from the current record levels. Thus, it’s looking like the days of an expanding storage deficit (compared to last year and the five-year average) are likely numbered.
