Highlights of the Natural Gas Summary and Outlook for August 20, 2012 follow. The full report is available at the link below.
Natural Gas Summary and Outlook
- Price Action: Prices again slipped, as moderate forecasts look for lower demand in coming weeks. Prices fell 5.1 cents (1.8%) to $2.719 on a 16.3-cent range.
- Price Outlook: For data beginning in 2000, 49 weeks have seen a new low only three weeks in a row. Of those 49 weeks, 32 established another new low in the fourth week. Considering the close of $2.719 and the need to only print a $2.684 for a new weekly low, it is again considered likely a new weekly low is in store for the upcoming week. CFTC data indicated another drop in the speculative net long position. Total net length has been reduced nearly 40,000 contracts since late July. However, total open interest did edge back toward 5.3 million contracts as of August 14. Still, long liquidation could lead to further price weakness.
- Weekly Storage: US working gas storage rose 20 BCF for the week ending August 10. Current inventory levels of 3,261 BCF now rise 428 BCF (15.1%) above last year while surpassing the 5 year average by 368 BCF (12.7%).
- Storage Outlook: Relatively large 2011 injections are unlikely to be matched and thus a continued reduction in the storage surplus is expected. The absolute storage levels remain quite bearish with current inventories already exceeding the peak levels witnessed between 1992 and 2003. Thus, despite the continued dramatic reduction in the storage surplus and little to no fear of storage containment issues, there is also little doubt that a new record storage level will be established in October or November.
- Supply Trends: Total supply fell 0.1 BCF/D to 68.5 BCF/D. US supply components witnessed little change this week. The US Baker Hughes rig count saw both oil and natural gas activity reduced. However, a surge in Canada lifted the total North American rig count. The total North American rig count rose 10 and at 2,240 now trails last year by 220. The higher efficiency US horizontal rig count fell 8 and at 1,153 remains just 15 higher YOY.
- Demand Trends: Total demand rose 0.1 BCF/D to 63.0 BCF/D. Lower power demand was offset by increased R&C and industrial consumption. Electricity demand fell 2,513 gigawatt-hrs to 91,536 which exceeds last year by 393 (0.4%) while trailing the 5 year average by 610 (0.7%). Demand has now peaked and unlikely to reach recent levels until late October.
- Other Factors: Equity markets continued to grind higher with the S&P 500 index rising for the 6th consecutive week. This is the highest S&P 500 close since early April.
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