Key Points: Dry gas field production has increased slightly to 85 billion cubic feet per day (Bcf/d) or almost by 5 Bcf week on week according to Bloomberg scrapes for the report week ended Feb 15. Demand rebounded in all major categories after temperatures became colder. Canadian imports increased by almost 2 Bcf week on week while Mexico exports also increased, albeit marginally, by 0.3 Bcf.
Our analysis leads us to expect the U.S. Energy Information Administration (EIA) to report later this week that there was a 155 Bcf withdrawal for the report week ended Feb. 15, a slightly stronger but comparable pull compared to the five-year average withdrawal of 138 Bcf and compared to the 165 Bcf consensus whisper expectation.
The week was off to a sluggish start given the Presidents Day holiday on Feb. 18. The EIA reported a gas storage build of 1,882 Bcf for the week ending Feb. 15. The normal withdrawal that is expected during the report week follows the lower-than-average withdrawal seen the prior week. Henry Hub natural gas prices have stayed stable at $2.65 per million British Thermal Units (MMBtu) for the past two weeks despite the National Oceanic and Atmospheric Administration’s (NOAA) warm weather expectation. Because of the below-normal withdrawal for the week prior to the report week, we have updated our end-of-winter natural gas levels. We expect a 1,248 Bcf exit on March 31, 2019, in contrast to the 1,170 Bcf prior expectation. This level is still less than 2018’s winter exit rate but is not the lowest ever.
Supply: Negative
Average field supply has increased by almost 0.7 Bcf/d or 4.9 Bcf for the report week. The increase could be related to greater associated gas production from multiple sources including the Bakken play, offshore and Permian Basin. We do not anticipate supply reductions based on freeze-offs or delayed import deliveries. Accordingly, supply will offer little but negative pressure to this week’s price activity.
Weather: Negative
There has been a mix of forecasts reported for the weather outlook over the holiday weekend. NOAA latest six- to 10-day forecast is showing warm weather spreading across the Southeast and parts of Northeast as well. NOAA’s eight- to 14-day forecast shows high probability of cold temperatures over the entire Lower 48 except Florida. All in, we see Weather as being a negative driver for gas prices this week.
Trader Sentiment: Negative
Despite the U.S. Federal Government shutdown being over for at least the next few weeks, it is expected that the data reports by the Commodity Futures Trading Commission (CFTC) will show only lagging data for the next few weeks until March 8. We will resume our analytical coverage of CFTC data when the agency resumes reporting CFTC data that are contemporaneous with the other data in these weekly analyses. With forecasts surrounding short-range warmth and long-range cold, the natural gas futures for March have fallen by 1.1 cents to $2.6/MMBtu. Trader sentiment appears to be mildly negative for this week’s price activity
Storage: Positive
We estimate a storage withdrawal of 155 Bcf will be reported by the EIA for the week ended Feb. 15. We had estimated a 77 Bcf withdrawal in the prior forecast that was lower than the then consensus of 85 Bcf. We were very close to actual EIA reported withdrawal of 78 Bcf. Our 155 Bcf expectation for the report week is almost double our prior week’s expectation and much higher than the last week’s reported figure. We see storage changes as a positive driver for gas prices this week.
Demand: Positive
Demand for natural gas remains strong however the gas storage inventory is no longer setting new lows and has come within the five-year average values. Overall demand increased by 10 Bcf/d week-on-week, almost half of the increase coming from residential and commercial sector. Demand for natural gas in power generation and industrial sector rose by more than 23 Bcf between report week and prior week. We see a positive effect for structural demand side drivers this week.
Flows: Neutral
There were no reported upset conditions during the report week. We see Flows as being a neutral driver for gas prices this week.
Recommended Reading
Phillips 66 to Acquire Pinnacle Midstream for $550MM
2024-05-21 - Phillips 66 said the deal to acquire Pinnacle Midstream was a strategic move to expand its natural gas gathering and processing assets in the Midland Basin.
Deal Change: BANGL Stake No Longer Part of Energy Transfer’s WTG Merger
2024-06-26 - NGL production in Texas is following a growth trend as it recovers from COVID-19, and the BANGL Pipeline's joint venture partners want in.
Same Game, Fewer Players: Midstream M&A Stands Apart from E&P Sector
2024-07-15 - The midstream M&A market typically follows the E&P sector by a few months. But some aspects of the market are different this time around.
Energy Transfer Remains Hungry for M&A, Sees 1Q Oil Volumes Surge
2024-05-09 - Energy Transfer reported record first-quarter crude volumes and expects demand for petrochemicals to continue rising.
Energy Transfer-Sunoco JV Forms Monster Permian Network
2024-07-17 - The joint venture between midstream operators Sunoco and Energy Transfer’s crude gathering in the Permian Basin should prove to be mutually beneficial, analysts say.