15
Jan

Thursday Night Natural Gas Storage Post

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Commodity Watch:

Natural gas closed off $0.07 at $4.89 today as the EIA released another sub expectation withdrawal from storage.

ZComment: Obviously industrial and electrical demand are weaker than people thought. Frac spreads may be playing a roll as well in temporarily expanding available gas supply.  Very tough to see how gas is going to get out of the heating season much above $5 let alone $6 now. People are going to be 1) in shock and 2) in search of those names with big % of production hedged, and 3) wanting to see more rigs cut (and horizontal drilling rigs at that, not just gas rigs).

Near Term Gas Price Thoughts. If the storage number had come in in the triple digits, at least 110 Bcf, I would have thought we would see that mild rally into next week’s number. Now, I think that still happens, probably on Tuesday (Monday is a equity market holiday) but that fear takes over sometime Wednesday unless the HDD number is some crazy 275+ beasty and then gas should move back over $5.25. Otherwise, traders sell into the number thinking “fool me three times, shame on me…”

Looking at the rest of the withdrawal season, traders are going to do the straight-line math with the time remaining and think, “I really need to sell”. So unless the weather stays very cold and the withdrawals snap back into something like Jan/Feb levels from these November looking numbers that’s their game plan.

Right now there are 12 weeks left in the season, and we need bigger average withdrawals to get to a normalish trough.  To get to last year’s storage trough we need to see withdrawals average 125 Bcf. At first glance that would seem to be a tall order. Want to get to the 5 year average? Try 116 Bcf. Again, pretty tough.

It's Possible With Sustained Cold To Get There But Then What? We are seeing a much colder January than originally forecast and February is still supposed  to be bitterly cold. Taking a look at the Residential demand in the cold years shows we can get there, if we get that sustained cold. In fact, there is quite a bit of swing in gas demanded for space heating during the first quarter of the year, more so than seen in the pre holiday (early withdrawal season months). So it's possible ...

Food for thought. Hmmm. If you take the coldest Jan to March weather and apply it to Residential and Commercial demand figures this year you come with an extra 3.5 Bcfgpd of demand. Given the lower imports (down nearly 2 Bcfgpd from year ago levels) this would offset the extra supply on the market at present.

 

 

3 Responses to “Thursday Night Natural Gas Storage Post”

  1. 1
    1520sbroad Says:

    Z- good stuff here on the storage outlook. What are your thoughts for the injection season given the big fall off in rigs that we are seeing right now? Will a lower rate of injection sneak up on us from April – October of next year?

  2. 2
    1520sbroad Says:

    next year is now this year — 2009.

  3. 3
    zman Says:

    1520 – Hard to say. Much depends on the economy and industrial demand (normally 30% of total demand). Will graphasize ™ a couple concepts in tomorrow’s post.

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