Executive Market Summary
Warmer temperatures have been helping stabilize natural gas production. It is expected that production in 2014 will hit a record high. The warmer temperatures have also resulted in total overall natural gas consumption to decline for the second week in a row. Consumption declined to 64.8 Bcf/day from 67.5 Bcf/day this week, the lowest weekly average since the beginning of November 2013.
The weekend will be pleasant across the majority of the U.S. but a trough of cold air will drop from Canada early next week. This is expected to send temperatures below freezing in the MidWest and Northeast Monday through Thursday. Temperatures are expected to normalize at the tail end of the week (CenterPoint).
As you likely already know, this winter’s withdrawal season (November 1 – March 31) saw the largest total natural gas storage depletion in 10 years. Due to the colder-than-usual temperatures across much of the country, we still sit at a record low storage number. This week, analysts anticipated the first storage injection to be about 16 Bcf. In actuality, the injection was 4 Bcf. Though better than a withdrawal, it still did not meet expectations and caused natural gas pricing to rise.Read More
Charts and Graphs
Fed Shows Worry About Inflation. Fed officials are growing concerned the U.S. inflation rate won’t budge from low levels, the latest sign of angst among central bankers regarding the global economy.
Economists See Growth Spurt Delayed, Not Derailed. Harsh winter weather delayed—but likely didn’t derail—the breakout growth many economists expected for the U.S. going into the year, according to The Wall Street Journal’s monthly survey.
Jobless Claims Hit 7-Year Low. The number of Americans filing new claims for unemployment benefits fell last week to its lowest level in seven years, a sign the labor market is rebounding sharply from a winter-related soft spell.
Back in the real world of the debilitated Greek economy, the country remains mired in deflation. CPI fell 1.3% on year in March after dropping 1.1% in February, with consensus -1.1%. Unemployment declined to 26.7% in January from 27.2% in December.
Chinese exports tumbled 6.6% on year in March, which represented an improvement from an 18.1% plunge in February, although consensus was for growth of 4%. Imports slumped a worse-than-expected 11.3%, while the trade balance swung to a surplus of $7.71B from a deficit of $22.98B. Economist Hu Yifan says that “investors don’t have to be worried,” about the numbers, as the export declines were partly due to artificially high data a year earlier and the severe winter in the U.S.Read More
Natural Gas Update
Natural Gas Storage Facts
EIA (Energy Information Administration) reported a net injection of 4 Bcf (billion cubic feet) for the week ending April 4, 2014.
Inventories are at 826 Bcf, which is down 50.7% or 849 Bcf from last year and 997 below the 5-year average or 54.7%.
Spot prices rose slightly at most hubs for the report week (Wednesday, April 2, to Wednesday, April 9) and went up significantly at the benchmark Henry Hub, following declines the previous week. The Henry Hub spot price rose from $4.35/MMBtu last Wednesday to $4.66/MMBtu yesterday.
At the New York Mercantile Exchange (Nymex), the May 2014 contract increased from $4.364/MMBtu on Wednesday to $4.586/MMBtu yesterday.
Working natural gas in storage rose to 826 billion cubic feet (Bcf) as of Friday, April 4, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net storage injection of 4 Bcf for the week resulted in storage levels 50.7% below year-ago levels and 54.7% below the 5-year average.
The total rig count was 1,818 as of April 4, an increase of 9 from the previous week, according to data from Baker Hughes Inc. The natural gas rig count decreased by 2 rigs to 316, while the number of oil-directed rigs rose by 11 to 1,498. Since the beginning of 2014, the gas-directed rig count has decreased by 56, with the biggest declines at the Eagle Ford Shale in South Texas (-15), and the Woodford Shale in Oklahoma and Texas (–10). The oil-directed rig count increased by 120, with biggest increases at the Permian Basin in West Texas and eastern New Mexico (61), and the Eagle Ford (11).
A 2% rise in the price of propane, from $11.48/MMBtu to $11.71/MMBtu, caused the weekly average natural gas plant liquids composite price to increase for the second week in a row. The composite price rose this week (covering March 31 through April 4) by 0.2%, and is now at $9.94/MMBtu. The propane price increase alone drove up the composite price, as prices decreased for ethane (1.3%), butane (0.7%), isobutane (1.0%) and natural gasoline (0.7%).
12/24-Month Strip (NYMEX) Price
12 Month Strip 24 Month Strip
$4.674 MMBtu $4.462 MMBtuRead More
Crude Oil Price: $103.60
Brent Falls on Libya as WTI Discount Shrinks
Brent crude fell for the first time in three days on speculation that Libyan oil exports will increase next week. West Texas Intermediate’s discount to Brent shrank to the least in almost seven months.
Futures in London dropped 0.5 percent while WTI slipped 0.2 percent. Libya aims to ship the first tanker from the harbor of Hariga since rebels handed the terminal over to the government earlier this week, an oil ministry official said. The possible return of supply is weighing on prices, said Seth Kleinman, Citigroup Inc.’s London-based head of energy research.
“Brent has been moving on the latest developments in Libya for a while now,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It looks like exports should recover somewhat, which is putting downward pressure on Brent and narrowing the spread with WTI.”
Brent for May settlement decreased 52 cents to end the session at $107.46 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was 9.7 percent below the 100-day average at 4:03 p.m. in New York.
WTI for May delivery fell 20 cents to settle at $103.40 a barrel on the New York Mercantile Exchange. Volume was 5.9 percent more than the 100-day average. The contract advanced $1.04 to $103.60 yesterday, the highest close since March 3.
Brent, which is used to price more than half of the world’s crude and, unlike WTI, can be exported, is often more sensitive to changes in the global supply-and-demand balance. The European grade closed at a $4.06 premium to WTI, the least since Sept. 19 on a settlement basis.
Libyan lawmakers will meet on April 13 to discuss a deal that returned the two ports the government, potentially tripling the country’s oil exports. Rebels seeking self-rule in the country’s east retain control of Es Sider and Ras Lanuf harbors. Some members of parliament objected to a clause in an agreement with the rebels that requires salary payments to defectors from government forces, Sliman Qajam, a lawmaker, said yesterday.
Hariga can load 110,000 barrels of crude a day, according to the oil ministry. That’s 8.5 percent of Libya’s daily export capacity of 1.3 million barrels. The country holds Africa’s largest oil reserves. Output has declined by more than 1 million barrels a day in the past year, making it the smallest producer in the Organization of Petroleum Exporting Countries.
Brent also weakened after exports and imports unexpectedly declined last month in China, the world’s second-biggest crude consuming country, and OPEC trimmed estimates for the amount of oil it will need to produce.
China’s overseas shipments shrank 6.6 percent in March from a year earlier, compared with a median 4.8 percent expansion forecast in a Bloomberg survey of 47 economists. Imports were down by 11 percent, the General Administration of Customs said in Beijing today.
OPEC, responsible for 40 percent of the world’s oil supply, will need to provide an average of 29.6 million barrels a day of crude this year, according to its monthly market report. The assessment is 100,000 barrels a day lower than last month’s because of higher output from the U.S. and Canada.
U.S. crude production rose 37,000 barrels a day last week to 8.23 million, the highest rate since 1988, according to an Energy Information Administration report yesterday. Stockpiles grew 4.03 million barrels, more than five times as much as analysts forecast, to a four-month high of 384.1 million barrels, the EIA data showed.
“Yesterday’s report was quite bearish,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “Supplies climbed and production was at a multidecade high.”
Implied volatility for at-the-money WTI options expiring in June was 16.4 percent, down from 16.7 yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 477,787 contracts at 3:04 p.m. It totaled 789,212 contracts yesterday, 45 percent above the three-month average. Open interest was 1.67 million contracts.Read More
Wholesale Market Pricing
Reg Down: $0.02462
Reg Up: $0.03755
NYC LBMP: $0.05023
AEP GEN HUB LMP: $0.03153
Mass. Boston Day Ahead LMP: $0.045215
Illinois Hub Hourly LMP: $0.03384Read More
Here is the severe weather forecast for the next several days.
- Very limited severe weather threat.
- A few storms may produce small hail from eastern Colorado through the central Plains to the Ohio River Valley on Thursday.
- Scattered, non-severe t-storms are possible from parts of the Mid-Atlantic states to the Ohio Valley and mid-Mississippi Valley Friday.
Weekend/Early Next Week:
- Saturday: Isolated to scattered severe storms are possible from parts of the central Plains to portions of the Missouri Valley and upper Mississippi Valley.
- Sunday: More widespread t-storms, possibly severe, from the mid-Mississippi Valley to the southern Plains. As of now, this does not appear to be a severe weather outbreak. The best chance for severe weather appears to target parts of Oklahoma, central and east Texas, Arkansas and northern Louisiana.
- Monday: Lingering severe t-storms possible along the cold front in the Deep South. Locally heavy rain may trigger flash flooding, since much of this areas is still saturated from heavy rain earlier this week.