Welcome to the next installment in the soft launch of What’s Affecting Gas Prices?, a new weekly offering from the integrated global energy advisory professionals of Stratas Advisors. We welcome your feedback and intend to continue to build the offering as we have done with What’s Affecting Oil Prices?, which has garnered a significant following in the 40+ months since it was launched.
Bloomberg scrapes imply gas field production was 730 million standard cubic feet per day (MMscf/d) higher or nearly 5.2 billion cubic feet (Bcf) for the week, but inflows from Canada and LNG sank 1.2 Bcf and exports to Mexico grew by a bit more than 0.5 Bcf. Demand fell in non-power domestic industries but power generators burned 14 Bcf more gas than the prior week. (with all demand netting to a gain of 2.9 Bcf over the week).
Our analysis leads us to expect the U.S. Energy Information Administration (EIA) to report later this week that there was a 58 Bcf withdrawal for the week ended Friday, Nov. 30 (in line with the current 60 Bcf whisper consensus withdrawal expectation and below the 74 Bcf five-year average withdrawal, which would make it the first sub-normal withdrawal for the season to date).
Higher field supply will likely continue to show up in the forthcoming report on Dec. 6 and we think there’s nothing in the way of continued associated gas production gains across North America. Accordingly, supply fundamentals will likely offer little, but negative, pressure to this week’s price activity.
Heating demand appears to be moderating from the cold blasts seen since the start of the 2018-2019 winter. As the country thaws out and as winds quiet in West Texas and likely shift more power load back to natural gas consuming mode, we see weather as a neutral driver for gas prices this week.
Trader Sentiment: Neutral
We see directionless range-bound trading this week and next in the gas markets, and therefore see trader sentiment as a neutral driver of prices this week.
We estimate a storage withdrawal report of 58 Bcf by the EIA for the week ended Nov. 30, which is below the five-year average. This week’s lighter withdrawal may lead market bulls to take a breather. All in, we see storage changes as being a negative driver for gas prices this week.
We see a neutral effect for structural demand-side drivers this week. The report week ended Nov. 27 will see higher demand as a result of not having the national Thanksgiving holiday, although that extra day of full-on demand will be offset in part by more moderated heating demands. However, a moderating trend in West Texas winter winds should cause wind turbine generation output to decline which will boost power generation demand for natural gas. We see demand this week as a neutral factor for prices.
Absent any freeze-offs or other upset conditions beyond the known pressure and flow restriction on the import pipeline in British Columbia, we see flows as a neutral driver for gas prices this week.