DI Blog

Insights across the energy value chain

Natural gas storage inventories decreased 91 Bcf for the week ending January 4, according to the EIA’s weekly report. However, this draw includes a reclassification of 4 Bcf in working gas stocks in the Mountain region, implying a flow change of 87 Bcf. Regardless of looking at the net or implied flow, this week’s draw was above market expectations, which were 78 Bcf. The largest draw of the week came from the Midwest, which accounted for 35 Bcf.

Working gas storage inventories now sit at 2.614 Tcf, which is 204 Bcf below last year and 464 Bcf below the five-year average.

At the time of this writing, the February 2019 contract was trading ~$0.05 higher than yesterday’s close of $2.984/MMBtu.

With moderate weather the past few weeks, storage inventories have been able to climb their way back to 204 Bcf below last year’s levels. The key driver to price volatility has been, and will remain to be, weather forecast changes. Should weather forecasts remain moderate to above-average, expect prices to remain at or below $3/MMBtu. However, should forecasts change to show below-average temperatures, expect prices to show some volatility and be above $3/MMBtu.

See the chart below for projections of the end-of-season storage inventories as of November 1, the end of the injection season.

This Week in Fundamentals

The summary below is based on Bloomberg’s flow data and DI analysis for the week ending January 10, 2019.

Supply

  • Dry gas production decreased 0.16 Bcf/d on the week. Most of the decrease can be attributed to the Mountain region (-0.32 Bcf/d), where Wyoming dropped 0.28 Bcf/d. A slight offset to the drop in the Mountain region came in the South Central/GoM region, which increased 0.12 Bcf/d.
  • Canadian imports increased 0.70 Bcf/d week-over-week. This change is mainly due to additional receipts in the Northeast.

Demand

  • Domestic natural gas demand decreased 13.52 Bcf/d week-over-week. Above average temperatures had Res/Com demand down 9.38 Bcf/d on the week. Power and Industrial demand also decreased, falling 0.27 Bcf/d and 3.87 Bcf/d, respectively.
  • LNG exports decreased 0.05 Bcf/d, while Mexican exports increased 0.74 Bcf/d. The increase in Mexican exports is mainly due to deliveries out of South Texas onto the Sistrangas system in Tamaulipas, Mexico.

Total supply is up 0.54 Bcf/d and total demand decreased 12.94 Bcf/d week-over-week. With the increase in supply and the decrease in demand, expect the EIA to report a weaker draw next week. The ICE Financial Weekly Index report is currently expecting a draw of 75 Bcf for next week. Last year, the same week was a draw of 183 Bcf, while the five-year average is a draw of 222 Bcf.

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