Thursday Night Gas Review Plus Some Gas Supply Thoughts

 

Natural Gas: April contract gas closed flat at $9.74 after another "in line" to slightly low gas storage withdrawal was reported:

ZComment: At $9.70 natural gas has run up too far, too fast on cold weather. See the supply arguments below. 

 

And Now A Few Words & Graphs About Supply. See tomorrow's post for a few more words about gas demand.

U.S. Natural Gas Supply (Marketed Production + Imports)

• Domestic Gross Marketed Production: Rising.  From December 2007 (most recently available data) to  December 2006: up 3.8 Bcfgpd.

This growth has been a function of increased drilling in resource plays and, later in the year, new project startups in the Gulf of Mexico. Part of the recent strength in gas is, I believe, attributable to the deceleration in this graph. Having listened to a boatload of conference including the largest rig operators I expect this chart to trend sideways to slightly up as the year progresses.  Current elevated prices, something most operators did not anticipate are also likely to boost budgets and activity.

 

• The Big Wedges Of U.S. Lower 48 Natural Gas Production: Up 3% YoY. Natural gas produced in Alaska is reinjected or consumed in Alaska; (numbers in the pie are Bcfgpd for December 2007)

 

• Texas: A Third Of U.S. Lower 48 Gas Production. Texas grew by 1.5 Bcfgpd per day last year (2007 vs 2006), led by strong performance from the Barnett Shale. From the beginning of the year, the acceleration is more pronounced with production climbing 2.1 Bcfgpd (14%!) from January 2007 to the close of year.

• Other States: Resource Plays Driving Growth Hear as well. The other states production represents the aggregate production from the states not listed in the pie chart above. In some cases, like Arkansas (Fayetteville Shale), which is not traditionally a gas producer, this production is growing rapidly but it is still relatively small compared to places like Texas, Wyoming, etc.

• Gulf of Mexico: Production turned up near the end of 2007 as production at (APC)'s 1 Bcfgpd capacity Independence Hub ramped up.

Lower 48 Production: Resource Plays Yield Production Ramp. 

In A Nutshell: Supply Is Outstripping Demand.

Supply: 

• Production is up nearly 4 Bcfgpd in the most recently available 12 month period. Production was ramping as we exited the year and January and February are almost certainly at least 4 Bcfgpd above their year ago levels. This means there is potentially 30 Bcf of extra supply per week (4+ Bcf x 7 days).
• More recent data for imports shows volumes from LNG and Canada are running behind year ago levels by 1 to 2 Bcfgpd, potentially removing as much as 15 Bcf from the supply side of the equation.

Demand: (I'll put up more detailed demand figures over the weekend)

• Colder weather has  pushed up demand, however longer term, you can see that demand is not growing consistently. As electrical and industrial demand have grown, industrial demand has weakened. Periods of tightness caused by weather fewer and farther in between.

Looked at on a monthly basis, you can see the lack of growth during the slack seasons, meaning that it takes a cold winter to get gas off its ... Meanwhile, referring back to the growth in supply you can see that it is in a position to continue to growth regardless of the weather.