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November 3 Natural Gas Weekly: Storage Forecast And Update On Supply/Demand Balance

Nov. 03, 2017 11:44 AM ETBOIL, DCNG, DGAZ, FCG, GASX, GAZ-OLD, GAZ, KOLD, MLPG, UGAZF, UNG, UNL16 Comments


  • Total demand for American natural gas is up 15% y-o-y to 520 bcf.
  • Total natural gas supply is up 7% y-o-y to 83.3 bcf per day.
  • We currently expect EIA to report an injection of 21 bcf next week.

This report covers the week ending November 3, 2017. Daily data for October 28 to November 2 is estimated. Daily data for November 3 is forecast. To read last week’s report, please click here.

Total Supply/Demand Balance

We estimate that aggregate demand for American natural gas (consumption + exports) totaled around 520 bcf this week (up 8.0% w-o-w, and up as much as 15.0% y-o-y). The deviation from the norm stayed positive and actually increased from +16% to +19% (see the chart below). According to our calculations, aggregate demand for U.S. natural gas (on a weekly basis) has been above 9-year norm since February 24, 2017. Total number of cooling degree days was below the norm, while the number of heating degree days was slightly above the norm for most of the week. Natural gas consumption, therefore, remained strong (some 12% above the norm). Total exports (i.e., pipeline flows to Canada and Mexico + LNG exports) declined marginally w-o-w but were still up some 40% y-o-y. According to Marine Traffic data, no less than 4 LNG tankers (total natural gas carrying capacity of 13 bcf) departed from Sabine Pass over the past seven days.

* norm defined as simple average over the last nine years. Source: Bluegold Research

We estimate that dry gas production has been expanding in annual terms for 22 consecutive weeks now. This week, the annual growth rate has accelerated to more than 7% due to stronger wellhead production in the Eastern part of the U.S. and also in the onshore Gulf Coast region. We expect this trend of positive annual growth to continue partly due to base effect and partly due to genuine recovery in output. However, we would also expect it to slow somewhat in the coming weeks but remain positive. Total aggregate supply of natural gas (production + imports) averaged around 83.3 bcf per day for

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Bluegold Trader profile picture
Bluegold Trader (BGT) is an independent provider of public market information and trading analytics. BGT is a one-stop shop for all your research needs in energy and forex trading.

Analyst’s 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.

We are long natural gas futures (winter contracts) and short in natural gas cash.

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Comments (16)

What are the utilities planning to burn is the question, will it be more coal or more NG to support the grid? My guess is coal as the price is stable and lower cost compared to NG as the regulations have been reduced. Coal can be stored on site and that may be a plus. But we don't know and hence a NG report is basically just that.
Joshua Heller profile picture
We know that there are more NG baseload power plants every year. Besides that obvious view, I think there is something less talked about.

Coal inventories were also very high last year and now are near normal. If you read coal producers (CLD, BTU, ARLP/AHGP, HNRG to name a few) they all talk about how contracting has changed. Power plants are now taking shorter and more flexible coal supply contracts. I suspect there was more coal burning last year because of contracting, even if it would have been more profitable to burn NG to produce electricity. I believe this will lead to more NG usage (with prices below 3). Unfortunately, I don't know that there will be a way to test this 'thesis' because there are too many other variables to distort the numbers.
"This is the main reason why we have closed all our short positions on November 1"
Hope you are right BG, but the weather and production are not exactly helping your bullish scenario.

- Modeled dry production back pushing 76 bcf.
- 8 to 14 day looks bad:
- Extended range not very promising to say the least either:

A lot more gas to soak up than last year at this time: http://bit.ly/2zeVCEM

Wouldn't be surprised to see a pull back next week.
Thanks for the timely info. This will be helpful for me for my trading next week.
Steve Frechette profile picture

I have a small long position that I should've exited Friday and switched short. I was wasting time playing golf instead of analyzing the rig report. It's not usually 70F in southern NH in Nov.

Nat gas can't catch a break. Headline rig report looks "positive" until you realize WTI is holding above $52 with ease. Brent above $60 will act like a magnet given the amount of refined products we export now. There are plenty of DUCs to complete and the limitation appears to be the frac teams, not economics. I expect continued production records for oil which means associated gas comes along for the ride in all of the south central shales.

The rig loss was not where we need it to be for a Bull rally. You need to see rigs leaving Marcellus, Utica, EagleF, Permian and Haynes. Lost a few in Haynes and elsewhere, but not nearly enough. No rigs left the big 4 (Mar/Ute, Perm & EagleF).

Appalachian production hitting all time highs with strong DUC inventory and substantially more rigs y-o-y. This is sending a clear message that the Mar/Ute producers are happy to crank out as much as they can at current prices. Also tells me they'll scale up quickly every time new pipes come online. I remember all the jokers earlier this year saying it would take a long time to fill Rover. HOGWASH!! The ramp up has been super fast and that's with crappy pricing.

That leaves weather as the driving force for the front 3 months with Cove as a psychological support even though it will take time to scale anywhere close to max. Weather is not looking good beyond Day 14. Better see a model flip by Sunday night or we're looking at Monday AM selling.

It's safe to say the Henry Hub has lost its command of the nat gas universe. Long live Appalachia, it will be magnet for prices in 2018.

Joshua Heller profile picture
Very amateur met here (my focus for this winter is on understanding short term weather better) so I could be wrong. Right now, I would bet that we gap higher.

Weather outlook via ECMWF is for HDDs to be approx 10% higher (ie colder) for the next 1-15 days. Looking at latest GFS runs also seem colder.

The other reason why I know it will gap up on Sunday, bc Friday morning I started to reduce my NG long position into the rally. I covered some longs and also sold a few call spreads (pretty far away). I am still very long though.
1. What is your take on longer term production volume? Do you agree with the EIA call for 2018 (assuming average weather)? I would really like gas volume to recover so I can deal with the peak oilers who crowed about the last couple years of flat production (at low prices, with storage overhang, after a huge runup, etc.)

2. App gas remains very depressed in local pricing. Will be interesting to see if those pipes get built or not. HH futures market is predicting only small impact, but still moderately negative, over next several years.

3. National volume observations are a little prone to misinterpretation since we really have a split market for pricing in App and HH. E.g. local growth in usage in NE helps the differential but does nothing to help HH.
beezwax profile picture
i'm going with lower then 21 and next week ng 3,088if not higher
pl investor profile picture
can the us continue to produce 28 trillion cubic feet of gas a year for more than 10 years without having serious supply issues down the road?
Natgas prices will have to increase in order to accomplish that.
beezwax profile picture
looks like eos under 3.8
Not. We are currently at 3798 with another 8 coming today and more next week: http://bit.ly/2j5bUvB
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