Highlights of the Natural Gas Summary and Outlook for the week ending March 10, 2017 follow. The full report is available at the link below.
Natural Gas Summary and Outlook
- Price Action: The April contract rose 18.1 cents (6.4%) to $3.008 on a 22.8 cent range.
- Price Outlook: Prices continued to rise on the 2nd total bullish weekly weather update of 2017. Weather forecasts removed 82 bcf from projected storage levels. However, the back of the forecast is again above normal and that is still considered bearish in late March and early April. Above normal temperatures are not bullish nationally until May or June. In Southern locations, much above normal temperatures can be bullish with A/C’s kicking on earlier. CFTC data indicated a notable increase in the managed money net long position as longs added and shorts were little changed. Total open interest rose to 3.730 million as of March 7. Aggregated CME futures open interest fell to 1.360 million as of March 10. The April $3.00 call is now the highest open interest option followed by the April $3.50. The October $5.00 call is 3rd. The April $3.00 put is in 7th.
- Weekly Storage: US working gas storage for the week ending March 3 indicated a working gas storage withdrawal of (68) bcf that was accompanied by a 4 bcf reclassification in the South Central Salt Region that resulted in an implied weekly flow of (64) bcf. Working gas inventories fell to 2,295 bcf. Current inventories fall (184) bcf (7.4%) below last year while surpassing the 5-year average by +355 bcf (18.3%).
- Storage Outlook: Our EIA weekly storage estimate was mathematically 5 bcf larger than the actual EIA report and is right at our tolerance range. The 5-week summation of our error fell to 1 bcf and is within our tolerance. The EIA has reported a net implied flow of (407) bcf over the last 5 weeks compared to our estimated (408) bcf. Our estimation for early April inventories is 2,100 bcf. Our forecast for early November inventories is 3,698 bcf.
- Supply Trends: Total supply fell (0.5) to 70.3 bcf/d. All supply components were slightly lower on the week. The US Baker Hughes rig count rose 2 as oil activity rose while natural gas slipped. The US Baker Hughes rig count rose 12 as both oil and natural gas activity increased. The total US rig count now stands at 768. The Canadian rig count fell 20 to 315. Thus, the total North American rig count fell 8 to 1,083 and now exceeds last year by 505. The higher efficiency US horizontal rig count rose 6 to 639 and rises 264 above last year.
- Demand Trends: Total demand rose +8.0 bcf/d to 78.4 bcf/d. R&C lead demand higher with power closely behind as all sectors rose. Electricity demand rose 3,242 gigawatt-hrs to 71,589 which exceeds last year by 237 (0.3%) and trails the 5-year average by 4,438 (5.8%).
- Other Factors: Nuclear generation fell 2,607 MW in the reference week to 987,758 MW. This is 169 MW lower than last year and 2,180 higher than the 5-year average. Recent output is near 88,250 MW.
The 2016/17 heating season is entering the final month of winter. With a forecast through March 24, the 2016/17 total heating index is at 2,185 compared to 2,188 for 2015/16, 2,693 for 2014/15, 2,980 for 2013/14, 2,724 for 2012/13 and 2,427 for 2011/12 and 2,887 bcf for 2010/11.
