Today's EIA Supply/Demand Numbers Are Mostly Neutral For Natural Gas Price

Jun. 16, 2016 5:47 PM ET
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Industrials, Energy, Natural Resources

Contributor Since 2013

Global Research Analyst

I appreciate Opposite Views and Opinions.

Behavioral Finance. Received my CFA Charter in 2014.

Today's weekly supply/demand data was not supporting for bullish scenario:

1) Producers have been lifting less natural gas than the year earlier in first two weeks of June. Production had been stagnating in May. But the pace of decline narrowed to -0.5% from -1.6% last week.

2) The numbers for power demand are also discouraging. The YoY growth was just 4% comparing to the pretty 20% surge of last weeks.

The new data is provided by OPIS and IHS in the much more informative format than before. It should be appreciated by the market.

New data format for EIA natural gas weely update has been initiated since the middle of May. New tables provide us with absolute numbers (BENTEK showed only percentage change) and with important Mexico and LNG export items.

The numbers for production looks more reliable than prior data from BENTEK Energy.

I do not know the difference between PointLogic and BENTEK. Both agencies are likely affiliate with Platts. However, BENTEK's numbers have mostly lost my confidence because of showing too much positive trend for production this year comparing to EIA monthly data, reported with two months lag. Possibly, assumption were based only on drilling activity, while producers were connecting wells in backlog.

Ethane recovery factor might enhance production drop in the third quarter. Production decline by 1.5%-3% YoY is supposed to support higher prices for natural gas this year, given substantial upside risk of cold winter.

Disclosure: I am/we are long CHK.

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