Natural Gas Storage Draws And Price Outlook Uninspiring

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Summary

Storage draw to be reported quite high.

But expected draws overall lower than last year and 5-year trend.

Historical price trends with bigger draw trend uninspiring.

The Energy Information Administration (NYSEMKT:EIA) reported last week that working gas in storage fell by 151 billion cubic feet (bcf) to end at 3,160 bcf, 10.3% lower than a year ago. Working gas in underground storage was also 0.1% below the much-watched 5-year average.

For heating season-to-date, gas-weighted heating degree days (HDDs) are forecast 16% below normal but 5% higher than last year.

For the week ending January 21st, gas-weighted HDDs are projected to be 35% below normal and 37% below those of a year ago.

Looking further out, the year-over-year storage comparisons to be reported are currently likely to fall short of last year's draw, as well as the 5-year average. Specifically, the market expectations for the 5 weeks ending February 10th is a draw of 737 bcf, compared to 774 last year and 806 over the past 5 years, on average.

Storage Changes

2017

2016

5-Year

1/13/2017

-235

-178

-170

1/20/2017

-102

-211

-176

1/27/2017

-110

-152

-166

2/3/2017

-140

-70

-138

2/10/2017

-150

-163

-156

Total

-737

-774

-806

To see how futures prices have trended in past years during these weeks, I calculated the net changes below. By and large, except for 2014, there has not been much strength in prices.

Natural Gas Futures Prices

2016

2015

2014

2013

2012

5-Year

1/6/2017

$ 2.27

$ 2.94

$ 4.31

$ 3.27

$ 3.06

$ 3.17

1/13/2017

$ 2.27

$ 2.94

$ 4.27

$ 3.37

$ 2.67

$ 3.11

1/20/2017

$ 2.12

$ 2.83

$ 4.33

$ 3.56

$ 2.34

$ 3.04

1/27/2017

$ 2.19

$ 2.98

$ 4.85

$ 3.29

$ 2.68

$ 3.20

2/3/2017

$ 2.04

$ 2.75

$ 4.91

$ 3.32

$ 2.50

$ 3.10

2/10/2017

$ 2.05

$ 2.68

$ 4.58

$ 3.28

$ 2.48

$ 3.01

$ (0.22)

$ (0.26)

$ 0.27

$ 0.01

$ (0.59)

$ (0.16)

Conclusions

Given the market expectations for draws in coming weeks, and the historical prices trends, I am not enthusiastic about price gains in the weeks ahead. But, as always, a major change in the weather could change that, but I would not risk capital betting on that.

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.