Thursday, December 17, 2015

Natural Gas: Ahead of Today's Storage Report, Platts Looks at the Market

 In an oversold market we're seeing some book-squaring ahead of the report, 1.837 +0.047.
A twofer from Platts:

NYMEX January gas futures settle 3.2 cents lower at $1.79/MMBtu
Houston (Platts)--16 Dec 2015 433 pm EST/2133 GMT

The NYMEX January natural gas futures contract settled 3.2 cents lower Wednesday at $1.79/MMBtu on continued mild weather around the US.

The January 2016 contract has been partying like it's 1999, or actually trading like it, hitting fresh lows every day this week. Wednesday's close was the lowest prompt-month settlement since it hit $1.759/MMBtu on March 24, 1999, a price now in the contract's sights.

The National Weather Service's six- to 10-day forecast calls for unusually warm weather in the Northeast, Upper Midwest, Midcontinent and Southeast. The eight- to 14-day outlook also calls for above-average temperatures across most of the country, with the western one-third expected to be slightly below average....MORE
...A consensus of analysts that Platts surveyed expects the US Energy Information Administration Thursday to estimate a pull from natural gas storage stocks between 38 Bcf and 42 Bcf for the reporting week that ended December 11....

US natural gas is high, low, and looking to 2016
If I had to sum up the US natural gas industry of 2015 in four words, they would be: high production, low prices. This year has indeed been a year that some people — such as consumers — will want to remember, while others — namely, producers — will want to forget.

It was one of those years when prices continued to drop, and market observers seemed to be holding their breath, waiting to see when prices would rebound. With just a few more weeks left in the year, it seems like we will still be holding our breaths at least into 2016.

Looking at natural gas supply, demand, and prices at hubs throughout the US on a daily basis all year, I wanted to share some of the most eye-opening year-over-year figures that I have come across while covering the market. Unless noted otherwise, in this piece I will be comparing 2015 averages year-to- date (with December 10 being our date) to the same time period in 2014.

What I hope to convey is just how challenging of a price environment 2015 has been for producers and just how resilient producers have been amid this downright pathetic price environment.

As of December 10, the NYMEX prompt-month contract in 2015 has averaged $2.66/MMBtu, 38.3% lower than the same time period in 2014, when the prompt-month’s contract average price was $4.31/MMBtu.

Cash prices at Henry Hub have been similar to the NYMEX contract. Year-to-date Henry Hub prices have averaged $2.658/MMBtu, a 39.7% decline compared to the same time period in 2014, when Henry Hub averaged $4.40/MMBtu.
Therefore, as a producer, two popular options for selling your gas this year has yielded returns that are nearly 40% lower than a year ago.

For producers working out of the prolific Marcellus and Utica formations, which is now the country’s largest producing region, cash prices at one the most liquid hub, Dominion, South Point, have been miserable. Year-to-date Dominion South prices have averaged $1.49/MMBtu this year, a 55% decline from a year ago, when the average price fetched at Dominion South was $3.33/MMBtu. I hate to beat a dead horse, but it is difficult to overstate how sobering and challenging it is for producers to work with such low prices.

And yet, 2015 has been a stellar year for natural gas production. No matter how you look at or break down the numbers, the word “impressive” continues to be at the tip of my tongue.

US natural gas production has averaged 71.9 Bcf/d in 2015, a 3.2 Bcf/d increase from a year ago. It is easy to forget the magnitude of just how much 71.9 Bcf/d of gas really is. To put this figure in perspective, Russia, the second largest producer with the world’s reserves, produced an average of 57 Bcf/d in 2014. The country with the world’s largest natural gas reserves is Iran, produced about 16.5 Bcf/d in 2014....MORE