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Summary

  • I'm comparing the current refill of working gas in storage so far from past years by imputed weeks.
  • The result shows that refilling working natural gas in storage is barely on pace to meet EIA's expectations.
  • With only 12 weeks left, we need a better refill rate to reach EIA’s target with certainty.
  • 2014 Accumulative CDD is about 12% less than 5-year average, which has been very helpful in rebuilding working gas storage.
  • Any adverse weather fluctuations could result in bigger natural gas swings in the remaining 12 weeks.

According to US Energy Information Administration EIA's newly released report (Thursday, Aug 14, 2014), working gas (dry natural gas) in storage was 2,467 Bcf (Billion cubic feet) as of Friday, August 8th, 2014. This represents a net increase of 78 Bcf from the previous week. Since the beginning of current injection season (April to October) the total net change of working gas in storage was 1,645 Bcf as shown in Table 1.

Table 1: Net Increase of Working Gas Storage Since Beginning of Injection Season
Week EndingStorage (NYSE:BCF)Increase from Last Week
Mar 28, 2014822
Apr 04, 20148264
Apr 11, 201485024
Apr 18, 201489949
Apr 25, 201498182
May 02, 20141,05574
May 09, 20141,160105
May 16, 20141,266106
May 23, 20141,380114
May 30, 20141,499119
Jun 06, 20141,606107
Jun 13, 20141,719113
Jun 20, 20141,829110
Jun 27, 20141,929100
Jul 04, 20142,02293
Jul 11, 20142,129107
Jul 18, 20142,21990
Jul 25, 20142,30788
Aug 01, 20142,38982
Aug 08, 20142,46778
Total Increase: 1,645
Note: Compiled from EIA data (same data source for other tables and figure).
Week ending April 4 week was the first week of 2014 Injection Season.

In a report, Natural gas injection season continues on pace for record refill, released on July 28, 2014, EIA projects working gas storage of 3,431 Bcf at the end of October.

Is the net change of 78 Bcf in the new release good or bad? Can we bring back the working gas stock to EIA's projected 3,431Bcf or higher by the end of the current injection season? We can compare it to history for a suggestion. In my Seeking Alpha article - Analysis Of Weekly EIA Working Gas Storage Data On Daily Basis - A New Look On Working Gas Storage Numbers, I transformed EIA's past weekly working gas storage data into a workable structure for 2014. In this way we can compare the working gas storage numbers in 2014 on the same month and same day among different years more accurately.

I am going to compare the current working gas in storage numbers to the past. First, I picked up the recent years from 2007 to 2013 as shown in Table 2. The table shows that since the beginning of this injection season (April-11), the net change of storage beats the seven-year average in all weeks except the Apr 11 and July 25 weeks. So far, we have an accumulated net increase that's 337 Bcf more than the seven-year average. This is not bad. But keep in mind, the net injections in the last seven years were far from EIA's projected 2,600 Bcf as shown in Table 3. The average net injection of the last seven years was only 2,046 Bcf -- that is 554 Bcf less than 2,600 Bcf projected by EIA.

Table 2. Comparison of Working Gas Storages by Week*
_2007 - 2013_______2014___________
7 DaysAverage ofChange fromStorageChange fromCompare to
Ending onStorageLast Week Last Week2007 - 2013
28-Mar1,695.822
4-Apr1,70498264-5
11-Apr1,7312785024-3
18-Apr1,768378994912
25-Apr1,832649818218
2-May1,905731,055741
9-May1,991861,16010519
16-May2,081901,26610616
23-May2,175941,38011420
30-May2,273981,49911921
6-Jun2,361881,60610719
13-Jun2,444831,71911330
20-Jun2,529851,82911025
27-Jun2,602731,92910027
4-Jul2,680782,0229315
11-Jul2,752722,12910735
18-Jul2,807552,2199035
25-Jul2,8591072,30788-19
1-Aug2,910512,3898231
8-Aug2,953432,4677835
Total 1,563337
* EIA's weekly reports are ending Friday. This table uses 2014's Friday's months
and days to select weeks in other years.
Table 3. Net Changes of Working Gas Storage
in Injection Seasons from 2007 to 2013
YearNet Change
20071,964
20082,172
20092,179
20102,217
20112,223
20121,486
20132,081
Average of 7 Years2,046
Note: Compiled from EIA data.
Injection Season: April - October.

We could argue that since the beginning of the injection season, we have 337 Bcf more injection than we did through this point in the last seven years (Table 2) -- if we could keep this rate of injection, we would fill a gap of 554 Bcf (2,600 - 2,046). I would like to crack the numbers further. I supplied Figure 1, which illustrates the net changes of working gas in storage by withdrawal and injection seasons.

Fig. 1 Comparison of NG Withdrawal and Injection Amount by Seasons

From Figure 1 we notice that 2003 saw a net injection of 2,406 Bcf. That was close to EIA's projection number 2,600 Bcf. Thus I picked 2003 to do a case study, which is summarized in Table 4.

Table 4. Comparision of Working Gas Storages by Week*
__2003_____2014___2014 Versus 2003
7 Days Change from Change from Difference of
Ending onStorageLast WeekStorageLast WeekStorageChanges#
28-Mar696.822
4-Apr688(8)826413812
11-Apr642(46)8502420870
18-Apr7026089949197(11)
25-Apr754529818222730
2-May836821,05574219(8)
9-May900641,16010526041
16-May990901,26610627616
23-May1,085951,38011429519
30-May1,1991141,4991193005
6-Jun1,3241251,606107282(18)
13-Jun1,4381141,719113281(1)
20-Jun1,5651271,829110264(17)
27-Jun1,662971,9291002673
4-Jul1,8091472,02293213(54)
11-Jul1,904952,12910722512
18-Jul1,981772,2199023813
25-Jul2,0621582,30788245(70)
1-Aug2,138762,389822516
8-Aug2,222842,46778245(6)
Total 1,611 1,641 30
* EIA's weekly reports are ending Friday. This table uses 2014's Friday's months and days to select weeks in 2003.
* 11-April as start week.
# Difference of the changes from the last week between two years.

Table 4 tells us that in the past 18 weeks, we've had 30 Bcf more refill than we did in 2003. Please bear in mind, we need about 2,600 Bcf refill in 2014, which is 194 Bcf more than 2003 to reach EIA's target of 3,431 Bcf working gas underground storage by the end of October. The current injection rate is not as great as some traders think. In other words, in 60 percent of the past 30 weeks (18/30), we only finished 15.3 percent of the job (30/196).

Some Seeking Alpha readers were against my model of comparison to 2003's data as 2003 was a pre-shale year without robust NG output increase overtimes. But I think this point of view can only support my model. It is my opinion that in the coming 12 weeks, we are still facing constraints on the supply side, though I do think we are on the way to normalizing the depleted working gas in storage if the current refill momentum is maintained or improves.

I am a little disappointed with this week's number. I am not able to explain why this week's number (78 Bcf) is so low as all published supply and demand data suggested a much better print should be in store. With this refill rate, we could have a storage number a little below EIA's target of 3,431 Bcf by the end of October. Please note the EIA's target of 3,431 Bcf working gas in storage is about 11% below the five-year average (3,842 Bcf). This would support the near-term working natural gas future price above $3.5/mmBtu. I here advise readers to be cautious in trading United States Natural GAS (NYSEARCA:UNG), especially holding short positions at near-term NG future prices below $4/mmBtu. But I don't see an immediate buying opportunity either because I'm not convinced that $4.5/mmBtu could be reached in the near-term. Experienced traders may make speculative bets on fluctuations in natural gas prices though. In my opinion, prices will have little chance to be below $3.5/mmBtu and stay there even for a few weeks over the next 2 months, unless supply increases unexpectedly (>= 6 bcf/day net increase over 2013). Actually we have had a cooler than average summer so far. From Table 6, we notice that there is about 12% less accumulative CDD (US continental, population weighted) in 2014 compared to its five-year (2009-2013) average. This undoubtedly has contributed a lot to 2014 working gas storage build-up, as natural gas fired turbines are not called upon as often to respond to heat waves.

Table 5. Comparison of Accumulated Cooling Degree Day CDD)

Accumulated CDD since April
2014 Week5 Year Average2014% Change
4-Apr4.20519
11-Apr12.212-1.6
18-Apr19.817-14.1
25-Apr30.424-21.1
2-May4638-17.4
9-May64.259-8.1
16-May84.6872.8
23-May110.6108-2.4
30-May152.4146-4.2
6-Jun197.6191-3.3
13-Jun247234-5.3
20-Jun303.2292-3.7
27-Jun375.6353-6
4-Jul448.6426-5
11-Jul531.2496-6.6
18-Jul615560-8.9
25-Jul701.4628-10.5
1-Aug778.9691-11.2
8-Aug859.2755-12.1

Note: Accumulated CDD is calculated by adding daily CDD since April 1st (beginning of injection season assumed).

65°F is used as base temperature.

This table is compiled from NOAA Degree Days Statistics database

Lastly, I prepared Table 6 that may be useful for readers interested in trading natural gas related securities. Readers with less statistical knowledge may only want to pay attention to mean, minimum and maximum though.

Table 6. Simple Statistics of Natural Gas Injection Amount by Months in Injection Seasons from 2000-2013

Mean

Standard

Standard

95% Confidence Interval

Month

(Average)

Minimum

Maximum

Median

Deviation

Error

Low Limit

High Limit

April

192

46

360

197

80

21

146

238

May

387

231

479

402

69

18

347

427

June

354

232

469

342

62

16

318

389

July

281

134

385

282

76

20

237

325

August

244

127

350

240

69

18

204

284

September

328

269

411

313

47

12

301

355

October

239

87

385

245

79

21

194

285

Sum of 7 Months

2,025

1,126

2,839

1,747

2,303

Note: Injection Season: April - October.

95% confidence interval is computed assuming net changes (Injection amount) are normally distributed over years by months in inject season and should be interpreted with caution.

I am keeping a close watch on the progress of working gas in storage refill and will share my research with Seeking Alpha readers accordingly.

Source: Where We Are Now? - Analysis Of Current Weekly (August-08) EIA Working Gas Storage Data

Additional disclosure: It is just my opinions without any third party interest. Readers should be aware of high investment risk in energy sectors, especially in coal and natural gas industries which is highly speculative. Readers should consult their own financial advisers before making any investment decision. It is to the best of author’s effort to collect and further calculate EIA’s data in this article with accuracy. Readers should take due diligence in reading all numbers in this article and are not encouraged to use these numbers in any purpose without their own validation.