07
Feb

Thursday Night Gas Report Thoughts – Another Big Withdrawal

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Natural Gas' immediate reaction to a bigger than expect 200 Bcf withdrawal was to double the day's gain to a dime. All eyes remain on the weather and this current week's early warmth is putting a cap on any meaningful rally beyond $8. After then selling off with the market gas recovered to close up $0.12 at $8.11. I still expect gas to sell off into the mid $7s over the next couple of weeks but that the erosion of the storage overhang to act as a floor under gas prices, baring early Spring-like weather. 

The current 12 month strip is at $8.46 and looks like this.

Strip Vs The Street:

gas-strip-vs-street.jpg

The Gas Storage Table: This week's withdrawal eroded the surplus to the five year average and built upon the YoY deficit.  

gas-table-020708.jpg

 

gas-graph-1-020108.jpg

The Storage Overhang Continued To Erode This Past Week

Both on a YoY...

 gas-graph-020108-b.jpg

...And 5 Year Average Basis. When you look at the chart below and the then the following chart (the red bars) you can see that any more cold bursts can quickly take out the remaining surplus to 5 year storage. Potentially within 3 to 4 weeks.  This would be headline news and would buoy gas prices. 

 gas-graphs-020108-c.jpg

Weather Still Rules For Now: This week's early read from the CPC is for HDDs to fall sharply from the prior week's level of 212 to only 169 which is below normal, below the year ago, and frankly not very likely. The CPC has repeatedly underestimated weekly readings of cold this winter and eyeballing the weather maps I'd say they've done it yet again for this week.

tough-comps-020708.jpg

Where do we exit the withdrawal season relative to historical averages?

  • Their are 8 weeks left in the typical injection season. Over the last five years, aggregate withdrawals during these 8 weeks have ranged from 650 to 825 Bcf.
  • This would yield a season end (end of March) range of 1,230 to 1,400 Bcf. Last year gas troughed at 1,511 Bcf.
  • An average for storage is pretty useless here as we've had a wide range of end of season levels over the last 5 years (700 to 1,700 Bcf)...
  • ...but a sub 2007 level (1,511 Bcf) start to the injection season is a good start.
  • I'll have a new supply growth and summer demand growth piece out relatively soon...
  • ...and a piece on the growing liquefaction and regas capacity for 2008/09. 

 

One Response to “Thursday Night Gas Report Thoughts – Another Big Withdrawal”

  1. 1
    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Friday Morning – EOG Beats Says:

    […] Thursday Night Gas Report Thoughts – Another Big Withdrawal […]

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