Natural Gas Storage Forecast For Next Week

Summary

• We anticipate a storage draw of -70 Bcf.
• If the EIA does report a storage report of -70 Bcf, it will be compared with -57 Bcf last year and -129 Bcf for the five-year average.
• The big fundamental news this week was that Lower 48 production averaged an all-time high of ~78.4 Bcf/d, and LNG exports reached ~4 Bcf/d.

Welcome to the natural gas storage forecast edition of Natural Gas Daily!

The EIA reported a -78 Bcf change yesterday, which was 6 Bcf lower than our forecast of -84 Bcf. Be sure to read our week of Feb. 23 storage report here. For the week of March 2, we expect a storage draw of 70 Bcf.

On a fundamental supply and demand basis, below is how each fundamental factor fared vs. the prior week:

On the supply side, Lower 48 production recorded the highest weekly average since we started tracking production. The ~78.4 Bcf/d average Lower 48 production this week puts the market growth YTD at ~1.1 Bcf/d. Canadian gas net imports mildly increased as well week over week, and total gas supplies were up ~0.4 Bcf/d week over week.

On the demand side, residential/commercial (heating demand) was lower week over week, but LNG exports came in at ~1.3 Bcf/d higher week over week. Cove Point LNG is now running at maximum capacity with LNG exports sitting at ~4 Bcf/d. In total, we see this week's implied balance being looser than last week's.

If the EIA does report a storage report of -70 Bcf, it will be compared with -57 Bcf last year and -129 Bcf for the five-year average.

Analyst’s Disclosure: I am/we are short DGAZ. 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.

Comments

[RickcarinoNYC]

All I can say is it’s cold in New York last week and this week averaged at 45 degree that should translate in 100 bcf withdrawal starting next report, this week estimated 65 bcf withdrawal is very low end, there will be upside surprises this March end on EOS and therefore I bought UNG

[vaibhav joshi]

thanks

[A W 2017]

"On the supply side, Lower 48 production recorded the highest weekly average since we started tracking production. The ~78.4 Bcf/d average Lower 48 production this week puts the market growth YTD at ~1.1 Bcf/d."

I read in the latest EIA update that the AVERAGE for the entire month of December was 78.3 bcfpd. Are you certain that one of the weeks in December wasn't above 78.4 bcfpd?

[HFIR Energy]

We never had 78+ in December.

[A W 2017]

???

The EIA posted December's dry production at 2,427,007, which is 78.29 bcf per day for the entire month.

Here is the link for you and your readers:
http://bit.ly/2CYOUTo

[ofg2425y]

why is August futures 12 cents higher than Apr if storage is going to fill up so fast...will we hit 2.75$ this week

[TreyT]

I thought I read in a post of yours yesterday that production was now above 79 bcf/d...now 78 and change?

[User 41156665]

I was under the impression that the weekly domestic natural gas production was ~10% higher than a year ago. Having only my wife's phone I can't access Blogs that I posted earlier on a computer as Seeking Alpha doesn't make them accessible by phone. I will check it out latter when I have access to those posts. If your comment isn't addressing me, pardon me for assuming so.

[TreyT]

I was addressing the author HFIR

[User 41156665]

Good points made by writer.

Exports and production are both up and although the withdrawal season has outpaced the past 2 seasons it seems to be lagging based on what the 'population-weighted' HDD days and Export data suggests. Nevertheless, a large portion of our expanded domestic production is still lacking accessible pipeline takeaway capacities and storage. This is particularly true, unfortunately, where we have the most rapid ramping-up of Natural Gas production and a nearby domestic market that has been forced to resort to importing natural gas from the Middle East due to that pipeline insufficiency.

That's the Boston and NYC area and even the Cove Point Export Facility, now coming online, has its tanks being filled by Royal Dutch Shell as the Atlantic Coast Pipeline is still facing delays and the entire project (Cove Point) was scheduled to come online in the 4th quarter of 2017, using their own Liquefaction Facilities and pipelines.

NYC and Con Edison meanwhile has continued its large-scale conversion from Heating Oil, among private residential and commercial buildings, into Natural Gas only to find a shortage of Natural Gas availability. This, if you check out Con Edison's website, is why they are rapidly ramping-up their Renewable Segment and diverting much of the conversions from Heating Oil to an increasing supply of new-built Renewable/Battery grid supplementations. Like most people it made more sense to me, for Boston and NYC to use the largely untapped Appalachian Shale-gas basins, such as the nearby Marcellus/ Utica. Unfortunately, the takeaway capacities are severely lagging demand and pipeline phobias have become an epic nightmare for consumer, producer and regulated utilities, alike.

The aforementioned, explains why the "South-Central" and "Midwest" regions had a much bigger year, from a Natural Gas demand/usage standpoint, than they should have, based on the warmer "South-Central" temperatures, lacking Population-Weighted HDDs, and the "Midwest" region, which essentially lacked Population instrinsic "potential" demand versus the "Eastern". However, it was the "Eastern" region which includes the colder than previous early winters', Megalopolis, that included ~90 million mostly urban/suburban consumers and some of the largest Industrial/Commercial/... users of energy, and a potential high Natural Gas demand increase epicenter, that found domestic Natural Gas unavailable in the required volumes. That led to Boston's continued importation of Natural Gas, through its Everett port and LNG off-loading facilities, and NYC depending more heavily on Renewables in the mid-term and Conservation in the Near Term. Con Edison, due to a lack of supply is limiting, through official Conservation Programs (see website) a 1.6% annual increase in Natural Gas while reducing Heating Oil to as great an extent as possible in many cases through central heating conversions to Electricity with a "Renewable/Battery" alternative Feedstock.

In English, I tend to agree with the writer here in saying that the remaining Withdrawal Season is likely to be somewhat lower than originally forecast, a month ago. A 50-80 Bcf withdrawal, overall seems likely on next Thursday's report (March 8th) with less likely thereafter.

[User 41156665]

The Ending Natural Gas Inventory is likely to be ~1.5 Tcf with record
production likely throughout 2018 despite persisting, regional Supply and Takeaway issues as Inventories build to around 4 Tcf by early November. Whether the ultimate Zenith is ~ 4 Tcf or materially less or more will depend on the overall coordination of the Upstream Sector with nearby domestic markets and ports that could greatly facilitate the expansion of the Natural Gas trade in the U.S. at every level. So far this coordination of segments has been disappointing, insofar as the long-term implications are concerned.

[User 47998195]

lwp,

I think what's important is that the entire Natural Gas hierarchical multi-sector domestic and international segments get properly and efficiently sorted out for the long haul on a competitive basis. BTW, when is the Atlantic Coast Pipeline going to link Cove Point to the Appalachian gas fields just over 120-170 miles to the West?

[TreyT]

LWP can't be much more than 4tcf, max storage is about 4.1, so add in some line pack and maybe effective storage is 4.3 or 4.4?

[beezwax]

celsius has it at 54

[beezwax]

59

[ofg2425y]

that should keep prices inching up as we now close in on 450 bcf below last year's eod

[gimmeecoffee]

Well, it was relatively warm last week in New York, but today and this week will suck, so I think we have more of an 80 handle as far as draw goes.