The Weather
Last week
Last week (ending June 5), the number of cooling degree days (CDDs) jumped by 19.1% w-o-w (from 53 to 64). We estimate that total energy demand (as measured in total degree days, or TDDs) was 9.4% above last year's level and as much as 14.4% above the 30-year average.
This week
This week (ending June 12), the weather conditions are warming up. We estimate that the number of nationwide CDDs will rise by 9% w-o-w (from 64 to 69). Total average daily consumption of natural gas (in contiguous United States) should be somewhere between 69 bcf/d and 73 bcf/d. Total energy demand (measured in TDDs) should be some 15.0% above the norm and as much as 25% above last year's level.
Next week
Next week (ending June 19), the weather conditions are expected to warm up again, but only slightly. The number of CDDs is currently projected to edge up by 3% w-o-w (from 69 to 71). Total energy demand (measured in TDDs) should increase by 8% y-o-y, while the deviation from the norm will remain positive at +10.6% (see the chart below).
Source: Bluegold Research estimates and calculations
The latest numerical weather prediction models (Wednesday's short-range 00z runs) agree that, over the next 15 days, TDDs should remain mostly above the norm (on average) - see the chart below.
Source: NOAA, ECMWF, Bluegold Research
However, there is a minor disagreement between the models in terms of scales: the latest GFS model (06z run) is projecting 71.0 bcf/d of potential natural gas consumption (on average over the next 15 days), while the ECMWF model (00z run) is projecting 71.4 bcf/d over the same period. Projected TDDs are trending higher and remain above the norm (+10.3%) as well as above last year's level (+14.7%). Indeed, there is now a major bullish divergence between the number of projected TDDs and the price level (see the chart below).
Source: Bluegold Research estimates and calculations
Overall, over the next 15-day period, total natural gas demand (when adjusted for probability) is expected to average 83.5 bcf/d. Total demand has already reached a "seasonal low" (on May 24) and should trend higher from now on. In relative terms, total demand is projected to remain mostly above the total supply curve until July 24 (at least) and is projected to reach a near-term low on June 13.
Source: Bluegold Research estimates and calculations
Supply
Latest dry gas production estimate (for contiguous United States): 87.9 bcf/d.
- -8.5 bcf/d from an all-time high;
- +0.8 bcf/d from a 3-week low;
- -0.6 bcf/d from Tuesday's results.
We currently expect dry gas production in contiguous United States to average 87.44 bcf/d over the next three months (June-July-August). Annual growth rate is slowing down. Indeed, in June, annual growth rate of daily production is projected to be negative - for the first time since April 2017.
Source: EIA, Bluegold Research estimates and calculations
EIA has revised higher its U.S. dry gas production forecast by +0.24 bcf/d (on average). EIA currently expects dry gas production to average 86.03 bcf/d over the next 19 months. EIA still projects that U.S. dry gas production will continue to decrease until March 2021. Net supply (calculated as dry gas production minus net exports) is currently estimated at 83.2 bcf/d, 1.5 bcf/d below last year's level.
Source: EIA, Bluegold Research estimates and calculations
Storage Report
This week, the U.S. Energy Information Administration should report a smaller change in natural gas storage compared to the previous week. We anticipate to see an injection of 87 bcf (5 bcf smaller than the comparable figure in the ICE's latest report for the EIW-US EIA Financial Weekly Index, 20 bcf smaller than a year ago and 7 bcf smaller vs. the 5-year average for this time of the year). Annual storage "surplus" is projected to shrink by 170 bcf by July 10.
Source: Bluegold Research estimates and calculations
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