Tracking natural gas injections

by: Michael McAllister

Tomorrow at 2:00 pm EST the EIA will post their weekly natural gas storage report. We continue to be in the shoulder season and demand based on summer temperatures does not reveal itself for another month.   

One can track the estimate for tomorrow's number a couple ways.

  • Bloomberg aggregates the estimates of around 20 firms.
  • ICAP an interdealer broker has actually created a couple of derivative instruments which are pegged off the storage number released.  The day before the storage number is announced, usually between 3:00 pm and 4:00 pm EST ICAP holds an auction where qualifying investors can "bet" what the number will be the following day.   While most of us are not able to partake in the auction, we can follow it, and get a sense of what the market is thinking.
  • Another source is the enigmatic Robry825 whose postings on the CWEI message board are legendary.  He posts a number of data points as to where he derives his estimates. 

For the record, the ICAP # looks like an injection of 90 bcf and Robry has an estimated injection  of 94 bcf.

If you would like to learn more about Robry please continue reading.

Robry825 posts multiple times in a row and he has a plethora of data.  I have converted that data into charts in an effort to simplify his predictions. 

The following is the US Gas Flow Model where one can see the daily injections/withdrawls:

Sheet1_chart_3

I am not a huge fan of his climate models because I find the data too broad for natural gas.   Due to infrastructure and population 52% of the Natural Gas consumed in the United States is concentrated in seven states.  A prudent follower would do better in following the weather effects in these states:

Sheet1_chart_10


To take it another step, as we enter the summer --- consumption needs change from heating to cooling so it might make sense to follow those states that consume large amounts of natural gas generated electrical power or as I would call it the "air conditioning factor".  Like before the needs are concentrated.  62% of electrical power consumption from NG is concentrated in five states:

Sheet1_chart_11_1

As one can plainly see Texas heat is quite important.

His US supply model shows a trend of declines:

Sheet1_chart_6

And he also tracks Canadian supply:

Sheet1_chart_7

Though the trend is down, 2005 does seem to show an improvement in production.

A chart of Canadian pipeline imports:

Sheet1_chart_8

LNG imports:

Sheet1_chart_9

Robry825 is currently bearish in his outlook of NG prices and correlated equities.  My belief is that the the current level of NG in storage coupled with his derivations of historical trends leads to a possible overhang in storage where supply constraints might occur.   

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