Natural Gas Modeled Storage Scenarios For 2016-2017 Winter

| About: The United (UNG)

Summary

EIA STEO projects storage 600 bcf lower end-March 2017 than 2016.

Given NOAA's degree days, I project storage about 200 bcf lower than that.

If temps were normal, ending storage would be a bit higher.

A repeat of last year's winter would result in storage at 2,360 bcf.

The Energy Information Administration (EIA) reported that working gas in underground storage ended at 3,836 billion cubic feet (bcf) for the week ending October 14, 2016. This figure was just 46 bcf higher than a year ago.

I have explained my methodologies for modeling and projecting U.S. natural gas marketed production and consumption. In this article, I present three modeled scenarios to compare against the EIA's Short-Term Energy Outlook (STEO) issued in October.

STEO

The EIA projects that ending-March working gas in storage will be about 1,896 billion cubic feet, about 600 bcf lower than March 2016.

MP

Loss

DP

LNG

Pipeline

SG

BI

Supply

Consumption

Inv Ch

Storage

Sep-16

76.17

5.08

71.09

-0.40

2.76

0.15

0.85

74.44

66.00

8.44

3712

Oct-16

76.63

4.94

71.69

-0.62

3.11

0.15

-1.34

73.00

64.82

8.18

3966

Nov-16

77.47

4.97

72.50

-0.65

3.10

0.15

-1.57

73.54

77.78

-4.24

3838

Dec-16

78.20

4.89

73.31

-0.55

3.90

0.16

0.25

77.07

92.60

-15.54

3357

Jan-17

78.60

4.91

73.69

-0.80

3.76

0.16

-0.41

76.39

100.25

-23.86

2617

Feb-17

80.11

4.95

75.16

-0.80

2.98

0.16

-0.82

76.67

96.52

-19.84

2062

Mar-17

79.60

4.76

74.84

-0.90

2.37

0.16

-0.14

76.34

81.67

-5.33

1896

Click to enlarge

Where:

MP = marketed production

Loss = extraction loss

DP = dry production

LNG = net imports

Pipeline = net imports

SG = supplemental gas

BI = balancing item

Based on the heating (HDD) and cooling degree days (CDD) projected by the National Oceanic and Atmospheric Administration (NOAA), and EIA's GDP forecast in STEO, I project that storage will end at 1,687 bcf in March.

MP

Loss

DP

LNG

Pipeline

SG

BI

Supply

Consumption

Inv Ch

Storage

Sep-16

79.12

5.08

71.09

-0.40

2.76

0.15

0.85

74.44

66.00

8.44

3712

Oct-16

78.84

4.94

71.69

-0.62

3.11

0.15

-1.34

73.00

67.31

5.68

3936

Nov-16

78.88

4.97

72.50

-0.65

3.10

0.15

-1.57

73.54

79.57

-6.03

3755

Dec-16

78.81

4.89

73.31

-0.55

3.90

0.16

0.25

77.07

96.74

-19.67

3145

Jan-17

78.74

4.91

73.69

-0.80

3.76

0.16

-0.41

76.39

101.71

-25.32

2360

Feb-17

78.66

4.95

75.16

-0.80

2.98

0.16

-0.82

76.67

91.71

-15.04

1939

Mar-17

78.61

4.76

74.84

-0.90

2.37

0.16

-0.14

76.34

84.47

-8.14

1687

Click to enlarge

If HDDs and CDDs are normal for these months, ending storage would be a bit higher at 1,710 bcf.

MP

Loss

DP

LNG

Pipeline

SG

BI

Supply

Consumption

Inv Ch

Storage

Sep-16

79.12

5.08

71.09

-0.40

2.76

0.15

0.85

74.44

62.50

11.94

3712

Oct-16

78.84

4.94

71.69

-0.62

3.11

0.15

-1.34

73.00

67.09

5.90

3936

Nov-16

78.88

4.97

72.50

-0.65

3.10

0.15

-1.57

73.54

79.34

-5.80

3762

Dec-16

78.81

4.89

73.31

-0.55

3.90

0.16

0.25

77.07

96.21

-19.15

3169

Jan-17

78.74

4.91

73.69

-0.80

3.76

0.16

-0.41

76.39

101.71

-25.32

2384

Feb-17

78.66

4.95

75.16

-0.80

2.98

0.16

-0.82

76.67

91.71

-15.04

1963

Mar-17

78.61

4.76

74.84

-0.90

2.37

0.16

-0.14

76.34

84.47

-8.14

1710

Click to enlarge

Finally, if we had a repeat of the very warm 2015-16 winter, storage would end at 2,360 bcf.

MP

Loss

DP

LNG

Pipeline

SG

BI

Supply

Consumption

Inv Ch

Storage

Sep-16

79.12

5.08

71.09

-0.40

2.76

0.15

0.85

74.44

63.73

10.71

3712

Oct-16

78.84

4.94

71.69

-0.62

3.11

0.15

-1.34

73.00

66.73

6.27

3936

Nov-16

78.88

4.97

72.50

-0.65

3.10

0.15

-1.57

73.54

77.31

-3.77

3823

Dec-16

78.81

4.89

73.31

-0.55

3.90

0.16

0.25

77.07

85.65

-8.58

3557

Jan-17

78.74

4.91

73.69

-0.80

3.76

0.16

-0.41

76.39

102.51

-26.12

2747

Feb-17

78.66

4.95

75.16

-0.80

2.98

0.16

-0.82

76.67

87.98

-11.31

2431

Mar-17

78.61

4.76

74.84

-0.90

2.37

0.16

-0.14

76.34

78.63

-2.29

2360

Click to enlarge

Conclusions

My estimates for end-winter show storage at about 200 bcf lower than the EIA's latest STEO report. The difference is mainly due to a higher demand estimate based on my regression analysis.

In addition, there is very little opportunity for higher natural gas prices to result in much of an increase in natural gas production, according to my model. Increases in rigs take 5 months to impact new production, based on regression result best-fits (i.e., this is not an assumption). Then it takes another month to bring new production online (i.e., 6-month lead time in total).

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.