The Matterhorn Energy Weekly EIA Natural Gas Storage Forecast for gas week 4/5/12 is +21 BCF.
If the EIA reports in line with our expectations this week, we would view the market as reverting to the range of 4.75-5.00 BCF/d tight to our 2011 baseline. Last week's +42 BCF came in at 2.25 BCF/d tight to our 2011 model, and we view that week over week loosening to be driven by a lack of heating demand as the end of the heating season, for all intents and purposes, came to a close.
Our forecast of +21 BCF this week is a combination of our scrape forecasts and our demand model. We modeled heating demand at +0.75 BCF/d week to week as our national sample picked up 2 HDDs. Roughly speaking, our model typically assigns 1 BCF/d to each national HDD, so the adjustment we made from last week's demand miss is evident. The remainder of the week to week tightening came from a reduction in US Dry Gas Production and a large increase (+1.75 BCF/d) in gas fired power generation.
COAL TO GAS SWITCHING JUMPS
The reference week saw an increase of almost 0.70 BCF/d of coal to gas switching, adjusted for nuclear generation outages. The increase in switching over the past three weeks has been impressive, but follows a large move in the economic spread between coal unit economics and the equivalent natural gas unit.
As mentioned several weeks ago, we saw a large disconnection between what our economic model told us the coal to gas switch should be, and what our realized power burns were showing as actually being run. We expect to see a continued in-crease in coal to gas switching as generation demand begins to pickup with cooling degree day registers in the Gulf and Southeast as the current queue of natural gas fired plants in dispatch get called upon.
Below is our assessment of where current coal to gas economics predict nuclear adjusted switching should be on a rolling two week basis. As the nuclear outage season comes to a close in early May, we expect this expected switch to jump by almost 1 BCF/d.
The red dotted line is our model prediction. Orange bars are actual switch.
EARLY LOOK FORECASTS
As of 4/9/12, the Matterhorn Energy Demand Model sees the following going forward: