Friday, August 30, 2019

Natural Gas: EIA Weekly Update

Natty has been ticking up for the last week and it appears the game is afoot.

The positioning of the commercials (vs the large speculative traders) is what caught our collective eye:
As noted in a late July post commercial users of natural gas are as long futures as wee've seen in years:
which led to this on Aug. 21:  Ya Know What Seems Cheap? Natural Gas Seems Cheap.

And now, from the U.S. Energy Information Administration:
for week ending August 28, 2019   |  Release date:  August 29, 2019  
In the News:
Corn crop maturity suggests late harvest and high heating fuel demand this winter
Indicators reported by the U.S. Department of Agriculture (USDA), the National Oceanic and Atmospheric Administration (NOAA), and other agencies suggest demand for heating fuels during the 2019 grain drying season may rise higher than the five-year average for the first time since 2013. Although crops are still about two months away from harvest, the combination of expected wet, late corn crops; relatively high grain prices; and relatively low propane prices suggest strong propane demand during this year’s grain drying season.
Corn crop maturity
Demand for heating fuel for drying corn grain in commercial dryers―instead of in the field―is affected by several factors:
  • Moisture content of harvested grain—corn kernels sold into the wholesale market must have a moisture content within allowable limits.
  • Harvest time—the later the harvest, the less likely producers are to leave the corn to dry in the field, and the possibility of frost and precipitation increases.
  • Producer economics—wholesale corn grain prices may or may not be high enough to allow producers to spend additional funds on commercial grain drying.
  • Cost of fuel—producers use either natural gas or propane in commercial dryers.
The USDA surveys producers to capture several corn maturity indicators, and they report these indicators weekly. After emergence, when seeds sprout, the USDA’s National Agricultural Statistics Service reports four stages of corn grain development:
  • Silking—about 9 to 10 weeks after emergence
  • Dough—about 3 weeks after the silking stage
  • Dent—about 1 week after the dough stage
  • Mature—about 3 to 5 weeks after the dent stage
The USDA reported that corn crops are reaching the dough stage one to two weeks later than the 5-year average in the seven Midwest (PADD 2) states with the highest grain drying fuel demand (Illinois, Indiana, Iowa, Minnesota, North Dakota, South Dakota, and Wisconsin). However, this year’s crops appear to be catching up. Emergence occurred about five weeks behind the five-year average, and silking was only about three weeks behind the five-year average.
NOAA’s National Weather Service 30-day forecast suggests that in September―when corn crops should be reaching maturity―corn-growing states will experience weather that is both cooler and wetter than normal. This weather could slow the crop’s maturing process and increase the moisture that must be removed during the drying process.

The USDA projects 13.9 billion bushels of corn will be harvested in 2019—less than in the previous three years but slightly higher than the 13.8 billion bushels harvested in 2013. The relatively small corn crop, combined with lower corn inventories, has resulted in higher average futures prices for December corn delivery than at any time since 2013. Midwest propane prices, on the other hand, as reported at Conway, Kansas, are at multi-year lows, averaging less than 35 cents per gallon so far this August, less than one-half the price in August 2018 and less than one-third the price in August 2013.
(For the week ending Wednesday, August 28, 2019)
  • Natural gas spot prices fell at most locations this report week (Wednesday, August 21 to Wednesday, August 28). Henry Hub spot prices dropped slightly from $2.25 per million British thermal units (MMBtu) last Wednesday to $2.24/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the September 2019 contract expired yesterday at $2.251/MMBtu, up 8¢/MMBtu from last Wednesday. The October 2019 contract increased to $2.222/MMBtu, up 4¢/MMBtu from last Wednesday to yesterday. The price of the 12-month strip averaging October 2019 through September 2020 futures contracts climbed 3¢/MMBtu to $2.373/MMBtu.
  • Net injections to working gas totaled 60 billion cubic feet (Bcf) for the week ending August 23. Working natural gas stocks are 2,857 Bcf, which is 15% more than the year-ago level and 3% lower than the five-year (2014–18) average for this week.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 27¢/MMBtu, averaging $4.37/MMBtu for the week ending August 28. The price of natural gasoline fell by 2%. The prices of ethane, butane, isobutane, and propane, rose by 16%, 13%, 10%, and 5%, respectively.
  • According to Baker Hughes, for the week ending Tuesday, August 20, the natural gas rig count decreased by 3 to 162. The number of oil-directed rigs fell by 16 to 754. The total rig count decreased by 19, and it now stands at 916.