Highlights of the Natural Gas Summary and Outlook for October 28, 2016 follow. The full report is available at the link below.
Natural Gas Summary and Outlook
- Price Action: The now prompt December contract fell 25.6 cents (7.6%) to $3.105 on a 43.1 cent range.
- Price Outlook: The market continued to fall as weather forecasts now project normal temperatures into early/mid November. At the same time, the EIA reported a storage injection that mathematically exceeded last year for the first time in 30 weeks. Storage projections now suggest a new record storage level with injections currently forecast through the week ending November 11. If well above normal temperatures persist, an injection for the week ending November 18 is not out of the question. CFTC data indicated a reduction in the managed money net long position as some longs liquidated and some new shorts entered. Total open interest rose to 3.636 million as of October 25. Aggregated CME futures open interest rose to 1.137 million as of October 27.
- Weekly Storage: US working gas storage for the week ending October 21 indicated a net injection of +73 bcf that lifted total working gas inventories to 3,909 bcf. Current inventories rise 34 bcf (0.9%) above last year while surpassing the 5 year average by 178 bcf (4.8%).
- Storage Outlook: Our EIA weekly storage estimate was mathematically 2 bcf higher than the actual EIA report. The 5 week summation of our error rose to 6 bcf as the EIA has reported a net implied flow of +358 bcf compared to our estimated +364 bcf. For a 5 week period, this is within our tolerance range. Our current estimation for early April inventories is 1,448 bcf. The forecasts use a 10 year rolling temperature profile past the 15 day forecast.
- Supply Trends: Total supply was down (0.4) bcf/d to 72.0 bcf/d. US production, LNG imports and Mexican exports were higher. Canadian imports were lower. The US Baker Hughes rig count rose 4 as oil slipped but natural gas activity rose. The total US rig count now stands at 557. The Canadian rig count rose 10 to 153. Thus, the total North American rig count rose 14 to 710 and now trails last year by 256, which is down from the record 1,441 yearly deficit recorded on December 11, 2015. The higher efficiency US horizontal rig count rose 5 to 450 and falls 127 below last year.
- Demand Trends: Total demand was unchanged at 61.5 bcf/d. Higher power demand offset lower R&C and industrial demand. Electricity demand rose 2,587 gigawatt-hrs to 72,602 which exceeds last year by 3,175 (4.6%) and the 5 year average by 2,959 (4.2%). The EIA Monthly Electricity Report indicated a small monthly drop in total electricity demand in August compared to July even as natural gas generation easily established a new monthly record.
- Other Factors: Nuclear generation rose 1,163 MW in the reference week to 78,616 MW. This is 2,159 MW higher than last year while (914) MW lower than the 5 year average. Recent output is near 78,500 MW. Fort Calhoun in Nebraska permanently powered down.
The 2016/17 heating season is beginning. With a forecast through November 11, the 2016/17 total heating index is at 32 compared to 99 for 2015/16, 140 for 2014/15, 190 for 2013/14, 199 for 2012/13 and 199 for 2011/12.
