Learn more about Hart Energy Conferences
Get our latest conference schedules, updates and insights straight to your inbox.
Key Points:
Bloomberg scrapes imply gas field production was 550 million cubic feet per day (MMcf/d) lower for report week ended Dec. 13 compared to the prior week, but imports from Canada increased by 0.72 billion cubic feet (Bcf) while Mexico exports also increased by 0.54 Bcf. Demand also rose marginally in residential, commercial, power generation and industrial sector. LNG demand remains robust.
Our analysis leads us to expect a 90 Bcf withdrawal level for this coming report week. Our expectation is 3 Bcf higher than the current consensus of 87 Bcf and almost 60% of the 155 Bcf five-year average storage withdrawal.
Key Hub Price Call:
Henry Hub prices rose to $2.35 per million British thermal unit because of relatively tighter supply demand balance compared to previous weeks. Cold shots across the U.S. could be cause of decrease in production and increase in winter based heating demand.
Gas Price Differentials:
The cold front tracking across the Midwest and Central U.S. is expected to move into the East and Northeast later in the week. Differentials in the East and Northeast are expected to widen as these regional prices would go up.
Storage: Negative
We estimate a storage withdrawal of 90 Bcf will be reported by EIA for the week ended Dec. 13. That's far below the five year average 155 Bcf draw. Normally by mid-December, we see stronger pulls from natural gas inventory. Initial indications suggest little likelihood of increasing withdrawals through the end of December. All in, we see the storage changes as a negative driver for gas prices this week.
Weather: Neutral
Cold shots across the Midwest and Central U.S. will lead to strong demand the next few days with lows of -10s to 20s. The cold front with rain and snow will reach the East later in the week. Reinforcing cool air will continue across the Northeast late in the week with highs of 20s to 40s, while the rest of the country is expected to warm above normal w/highs of 40s to 70s. Accordingly, weather is a neutral factor this week.
Supply: Positive
Average field supply is likely to show a week-over-week decline of more than 0.55 Bcf/d but rising seasonal Canadian imports added 0.1 Bcf/d of supply into the market. Overall, we see Supply as being a weak positive this week.
Demand: Positive
We see a positive effect from structural demand side drivers for the report week. Gas-fired power generation has increased by 1.07 Bcf/d or 7.47 Bcf for the report week. From the residential and commercial sector, weekly average demand was 36.90 Bcf/d, albeit much lower than the winter highs of 50 Bcf/d. Unless the temperatures lower across the country and that too in heavily populated areas, demand is bound to stay flat at these levels.
Flows: Positive
LNG flows increased by 0.5 Bcf/d or 3.5 Bcf. The increase could be attributed to start of Freeport LNG terminal Train 1 during the report week. Flows are a positive factor for this week’s gas prices.
Trader Sentiment: Positive
Despite mild weather outlook, market participants are increasing the futures prices. We see trader sentiment as positive this week. The Commodity Futures Trading Commission's Dec. 13 commitment of traders report for Nymex natural gas futures and options showed that reportable financial positions (Managed Money and Other) on Dec. 10 were 220,548 net short while reportable commercial operator positions came in with a 183,877 net long position. Total open interest was reported for this week at 1,335,962 and was down 2,243 lots from last week's reported 1,338,205 level. Sequentially, commercial operators this reporting week were cutting longs by 16,587 while cutting shorts by 11,559. Financial speculators added shorts and added longs for the week (15,082 vs. 17,710, respectively).
Recommended Reading
Liberty Energy CEO: NatGas is Here to Stay as Energy Transition Lags
2024-03-27 - The energy transition hasn’t really begun given record levels of global demand for oil, natural gas and coal, Liberty Energy Chairman and CEO Chris Wright said during the DUG GAS+ Conference and Expo.
Green Light: NatGas Industry Just Fine, TG Natural Resources CEO Says
2024-03-27 - Craig Jarchow, president and CEO of TG Natural Resources, updated the integration status of its $2.7 billion acquisition of Rockcliff Energy and addressed macro concerns about the natural gas business at Hart Energy’s DUG GAS+ Conference and Expo in Louisiana.
Paisie: Dutch Vehicle Fleet Foreshadows Structural Shifts
2024-03-26 - The expanding role of battery electric vehicles will be supported by the development of associated supply chains, as indicated by Stratas Advisors' forecast of global EV battery production capacity.
Shipping Traffic Freezes Up in Port Waters After Baltimore Bridge Collapse
2024-03-26 - U.S. port of Baltimore traffic was suspended until further notice following a bridge collapse. At least 13 vessels expected to load coal were anchored near the port at the time of the incident.
Exclusive: Renewables Won't Promise Affordable Security without NatGas
2024-03-25 - Greg Ebel, president and CEO of midstream company Enbridge, says renewables needs backing from natural gas to create a "nice foundation" for affordable and sustainable industrial growth, in this Hart Energy Exclusive interview.