Highlights of the Natural Gas Summary and Outlook for June 19, 2015 follow. The full report is available at the link below.
Natural Gas Summary and Outlook
- Price Action: The July contract rose 6.6 cents (2.4%) to $2.816 on a 21.6 cent range.
- Price Outlook: Natural gas moved higher and established a new weekly high mid-week before slipping lower. The market ended in the lower half of the range and that implies a continuation lower. However, temperatures are expected to rise this week and are expected to approach normal peak summer time levels. Market reaction to the anticipated demand will be key in judging sentiment. The combined managed money net short position plummeted by over 21,000 contracts to under 75,000. Total delta adjusted open interest rose to 3.602 million as of June 16. Aggregated CME futures open interest rose to 1.051 million as of June 19. The market remains vulnerable to short cover rallies.
- Weekly Storage: US working gas storage for the week ending June 12 indicated an injection of 89 bcf. Thus total working gas inventories rose to 2,433 bcf. Current inventories rise 714 bcf (46.0%) above last year while surpassing the 5 year average by 41 bcf (1.6%).
- Storage Outlook: This week’s injection lowered the inventory surplus to +714 bcf and the +738 bcf from last week should represent the largest storage surplus on the year. However, the surplus to the 5 year average should continue to expand. This weeks’ injection was only slightly below our estimate. Over the last 5 weeks, the EIA has reported injections of 536 bcf compared to our estimate of 533 bcf.
- Supply Trends: Total supply was unchanged at 74.5 bcf/d. Canadian imports rose. US production was lower, Mexican exports rose and LNG imports were unchanged. The US Baker Hughes rig count fell 2 with oil activity lower while natural gas rose. The total US rig count now stands at 857. This is the lowest total US rig count since January 17, 2003. The Canadian rig count rose 9 and now stands at 136. Thus, the total North American rig count rose 7 to 993 and now trails last year by 1,130. The higher efficiency US horizontal rig count fell 1 to 662 and falls 588 below last year. This is the lowest US horizontal rig count since February 5, 2010.
- Demand Trends: Total demand rose 3.0 bcf/d to 61.3 bcf/d. Power demand rose with R&C and industrial lower. Electricity demand rose 9,104 gigawatt-hrs to 83,868 which surpasses last year by 5,610 (7.2%) and the 5 year average by 2,139 (2.6%). The week of June 26 is forecast to witness temperatures near normal summer time peaks of late July and early August. Thus, the demand witnessed this upcoming week should be representative of peak 2015 summer loads.
- Other Factors: Nuclear output was yet again higher in the reference week. However there was a yearly deficit this week for the first time since January. Recent output was above 94,000 MW.
- We have switched to our proprietary cooling index. With a forecast through July 3, the 2015 total cooling index is starting to pick up a bit at 1,078 compared to 956 for 2014, 1,355 for 2013, 2,251 for 2012 and 1,579 for 2011.
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