Posted on 11/07/2014 9:04:12 AM PST by thackney
Working natural gas in storage ended October at 3,571 billion cubic feet (Bcf), a record increase of 2,734 Bcf during the April 1 to October 31 injection season, and within 7% of the average of the last five end-of-season storage levels. While end-October natural gas stocks are at a five-year low, increased natural gas production, which has reached an all-time high, and new pipeline projects will help meet winter natural gas demand. Higher production means that even if this winter were as cold as last year, EIA expects that natural gas storage at the end of March 2015 will be above its March 2014 level.
Heading into the refill season last spring, inventories were at an 11-year low after a prolonged and severe winter, about 1,000 Bcf lower than the five-year (2009-13) average. Although the refill season began slowly in April, injections quickly ramped up and exceeded five-year average levels for 28 weeks in a row. The gap between the five-year average and current inventories has now narrowed to 261 Bcf. Analysts often refer to the injection season as ending on October 31, but the peak in storage inventories may come later, as it is common for injections to continue into November.
High levels of injections over the summer were possible because of relatively low natural gas demand from the electric power sector as well as substantial increases in domestic natural gas production. Relatively mild summer temperatures led to lower than expected demand for air conditioning, allowing natural gas to go to underground storage facilities rather than to electric power generators. Bentek data from April through October indicate consumption of natural gas in the electric power sector averaged about 2% less than last year's level and roughly 16% below its level during the summer of 2012.
The October Short-Term Energy Outlook projects inventories will drop to 1,532 Bcf by the end of the heating season on March 31, 2015. This projection is based on National Oceanic and Atmospheric Administration (NOAA) projections for relatively normal winter weather with temperatures much milder than the winter of 2013-14. Even if the weather this winter matches last year's cold temperatures, it is unlikely that stocks would drop to March 2014 levels (when inventories were at an 11-year low). This is largely because of the gains in domestic natural gas production. As of August 2014, dry natural gas production was 3.5 Bcf/d greater than the same month last year. Continued high levels of production expected through next spring will also help reduce the need to withdraw natural gas from storage over the upcoming winter.
Falling natural gas prices have reflected this increase in supply. Following sustained cold weather this past winter, daily spot prices at the Henry Hub benchmark rose to six-year highs in February, spiking above $7 per million British thermal units on three separate occasions. Prices have declined over the past several months, as weekly inventory additions have been consistently high and production continues to rise.
http://online.wsj.com/article/BT-CO-20141107-708515.html?mod=WSJ_Energy_middleHeadlines
November 7, 2014, 9:40 a.m. ET
Natural Gas Slips as Traders Profit From Recent Rally
By Christian Berthelsen
Natural gas futures eased Friday as traders booked gains from a strong market run-up in recent days with the appearance of the first winter-like weather of the season that is expected to drive gas-fired heating demand.
Natural gas for December delivery was down 3.6 cents, or 0.8%, to $4.3680 a million British thermal units on the New York Mercantile Exchange. The market posted a 5% gain a day earlier in the largest jump since June 12 and has risen more than 23% over eight consecutive trading sessions.
The market has been rallying with the appearance of extreme cold in the forecast over much of the middle of the country next week, with potential polar vortex conditions extending south from the northern Plains to Texas and stretching to the Midwest.
Wolf’s win in PA should put the brakes on some of it. Too bad Corbett was such an inept, out of touch, clueless GOP incumbent. Never saw a campaign so poorly run and so many opportunities as a governor pissed down the drain..
I agree. Pennsylvania's loss will be Texas, Oklahoma and Louisiana's gain.
I’ve expected storage to go down since there is now production above the traditional northward bound choke points. The new production is near city-gate so there is less need for storage now I should think.
The same goes for Cushing storage alone being the barometer for oil storage and supply / demand balances. Interesting, net supply in storage is near the 6 year lows and Cushing is at about 20.2 mmbo and that is 15.7 mmbo below the same stock last year! Refinery runs are increasing as turnarounds end. A cut in drilling will result in about a 70% decline in most shale wells less than a year old and something like 30% in older wells. Do the math (I have not done this comprehensively) and I don’t think there is a glut of oil for very long without continuing all out shale drilling. It should take about 5 years in an area to develop semi-stable production at IP levels of just the first year’s drilling.
The debt of some of the shalers is terrible. I looked at one in which a 25% decrease in revenue from price alone means they can’t drill and make interest service. Add to that a 70% decline and it looks like they would be in real trouble.
There is significant storage in the North and East as well, to help overcome pipeline limitations. More storage exists outside of traditional production areas than within.
I think the winter peak is going to continue to grow in the Northeast. Not just for direct heat, but conversion of electric generation to gas with winter peaks. Easier to add electric heat to an old crowded neighborhood than new gas line to replace the fuel oil.
The same goes for Cushing storage alone being the barometer for oil storage and supply / demand balances.
Yep, gasoline prices as an example more follow Brent than WTI.
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