Thursday, August 27, 2020

EIA Natural Gas Storage Report

While we are a lot closer to our $3.50 prompt/front month* sometime this year forecast than we were at $1.50:

It is going to take some cooler than average late fall weather to eat through the gas in storage.
Another gas-focused E&P bankruptcy or two would help too.

First up, the estimates going into the report via FX Empire:
....We’re looking for a build in today’s EIA storage report of 39 Bcf for the week-ending August 21.
Natural Gas Intelligence (NGI) is reporting that a Bloomberg survey as of Wednesday showed injection estimates ranging from 39 Bcf to 58 Bcf, with a median of 44 Bcf. A Wall Street Journal poll had the same range and arrived at an average 46 Bcf injection, while the median of a Reuters poll with the same range produced a 47 Bcf build. NGI projected a smaller 43 Bcf injection....
From the Energy Information Administration:
Working gas in storage was 3,420 Bcf as of Friday, August 21, 2020, according to EIA estimates. This represents a net increase of 45 Bcf from the previous week. Stocks were 580 Bcf higher than last year at this time and 438 Bcf above the five-year average of 2,982 Bcf. At 3,420 Bcf, total working gas is above the five-year historical range.

For information on sampling error in this report, see Estimated Measures of Sampling Variability table below.
Working Gas in Underground Storage Compared with Five-Year Range  
Note: The shaded area indicates the range between the historical minimum and maximum values for the weekly series from 2015 through 2019. The dashed vertical lines indicate current and year-ago weekly periods.
As you can see, gas in storage is above the five-year high for the date again this week.
And from the CME the price action (one week, 30-minute bars):

*From August 3's "Hey Lookee There, Natural Gas Is Up 17.8%"
....2.1190 up 0.3200
....As noted in the outro from Thursday's post on the decline following the storage report:
...That is an overreaction and we are still looking for prices to move: first, through the triple (or multiple) top just below the $2.00 line and secondly, to a front month price of $3.50 later into the heating season....
When price go through those multiple resistance (or support) levels they tend to go throuth with a bang. 
And July 2, 2020 "U.S. LNG Industry Needs Prices To Double":
We still think U.S. spot or near futures can see $3.50 but the wildcard is oil. If Cushing prices trade at current levels or higher there will be more oil produced than we were looking for back in April and with the oil comes the "associated" gas, keeping a lid on prices.

The other factors to be aware of are generally cooler than average temperatures so far this season, meaning less demand for air conditioning: the last EIA Weekly Update had population weighted Cooling Degree Days running at -12 for the last week reported (no update this week, they get the holiday)

The last negative impact is from LNG shipments, which at 25 Bcf are half of some weeks in February and March.
And that 25 Bcf shortfall is enough to move prices by 10% on storage report day   
And "EIA Natural Gas Storage Report, June 25: Yikes":
That low print was at $1.463 which is something like a thirty year low.
FX Empire goes on to talk about the decline in LNG exports from the U.S. but our readers have known about that for the last four or five weeks, a couple times per week.

What I haven't stressed enough, and the basis for our expectation of $3.50 gas some time this year was how fast the shale oil industry resumed drilling and pumping, bringing up all the "associated gas" with it and leading to posts such as:...
And May 15:
EIA Natural Gas Weekly Update
...1.7230 up 0.420 (+2.50%)...
...We are still looking for spot or a front month to print at $3.50 but it obviously wasn't the move from April into May, much as we would have liked it to be. ...