Executive Market Summary

August 15th, 2014

Executive Market Summary

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According to the National Oceanic and Atmospheric Administration, above normal temperatures are expected for the eastern half of the United States through next week. Temperatures in the Midwest are expected to remain normal to above normal in most areas. CenterPoint Energy also noted that forecasts are predicting the last half of August to be warmer than what was anticipated originally.

Due to the lack of cooling demand overall consumption decreased by 0.2%. The largest decline in power burn was in the Midwest, at 27.6%. Supply continues increasing due to record production numbers. The EIA released an updated Short Term Energy Outlook and expects production in 2014 to grow by 5.3% compared to last year. Above weekly storage injections have raised the projected end of injection season inventory to 3,460 Bcf.

Storage still stands 17.7% less than it did last year despite the record injections we continue seeing each week. Though the projected end of injection season inventory was raised, it still stands below the five-year average peak storage value of 3,851 Bcf. In order to reach the five-year peak weekly injections would need to average 114 Bcf/week. So, until the storage gap is filled it remains a bullish factor.

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August 8th, 2014

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For the most part, weather continues to be moderately cooler than average. As stated last week, forecasts predict August 2014 to be about 1.3% cooler than August 2013. Overall temperatures are expected to be relatively normal this coming week but a cold front is estimated to hit the Eastern United States later in the week.

The reduced weather-related demand will allow inventories to continue refilling at a rapid pace and keep natural gas usage at power plants low. Natural gas consumption for power generation fell 3% and total consumption fell by 2.6% this week.

This report week’s injection was about 2 Bcf lower than what forecasters expected. The 82 Bcf injection was also the first time in 12 weeks there was a smaller weekly build than last year and the year-on-year defecit increased from 530 to 538 Bcf. Early forecasts for next week indicate an injection well above last year’s rate.

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August 1st, 2014

Executive Market Summary

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This June was moderately warm across the US and July was significantly cooler overall – especially across the central regions of the country. Cooler temperatures are generally a result of emerging El Nino events and WSI’s chief meteorologist Todd Crawford believes that the progression toward El Nino conditions is continuing. Below-normal temperatures will be prevalent from the northern/central Rockies eastward with above normal temperatures expected in the Pacific Northwest and Southeast for the remainder of summer.

Mild temperatures August and September will decrease weather-related demand and should allow natural gas inventories to continue refilling rapidly – decreasing the deficit to last year’s level.  Chris Kostas, a Senior Power and Gas Analyst at ESAI, expects energy demand to soften considerably in October due to the seasonal temperature change. A soft demand is expected to help the natural-gas injection season finish very strong.

This report week’s storage injection fell short of expectations and caused about an eight cent bump in the market. The 88 Bcf injection was still well above last year’s injection of 57 Bcf. Fourteen weeks remain in the injection season and the EIA expects inventory levels to reach 3,431 by October 31.

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July 25th, 2014

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This report week’s 90 Bcf injection was larger than last year’s 43 Bcf injection and the five year injection average for the same week of 47 Bcf but it still did not meet expectations. Forecasts anticipated a 95-96 Bcf build and upon release of the report, the August natural gas futures contract increased 4 cents.

Net storage injections have totaled 1,397 since April 4 versus 1,080 Bcf for the same 16 weeks in 2013. These above average injections are a great help in making up for the deficit we created this winter.

Natural gas consumption decreased for the week mainly due to weather. Temperatures fell below normal for much of the eastern half of the United States. Mild temperatures are expected to continue for the next two weeks according to several sources, including John Kilduff, a partner at Again Capital LLC, a NY based hedge fund focusing on energy.

Production continues increasing overall – dry production hit a record high on Monday at 69.1 Bcf, according to the EIA. Genscape, a provider of real-time data and intelligence for commodity and energy markets, reports that dry production reached 70 Bcf for the first time Monday.

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July 18th, 2014

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Natural gas storage injections continue increasing at a record pace. This week’s injection was 107 Bcf, exceeding expectations of 100 Bcf. This is the eighth out of nine consecutive weeks storage has come in at or above 100 Bcf. From the week ending on April 4 through the week ending on July 11, net storage injections have totaled 1,307 Bcf, versus 1,037 Bcf for the same 15 weeks in 2013 (EIA).

Cooler temperatures this week have also had a bearish effect on the market. A cold air mass came down from the arctic and dropped temperatures across the nation – mainly in the Midwest. Patrick Badgley, Platts’ North American natural gas editor, points out that because most of the country has experienced a mild summer – gas prices are taking a hit.

Storage remains 608 Bcf below last year’s levels and overall consumption rose this week by 1.9%. The cooler weather caused residential and commercial demand to increase slightly. Power burn also increased by 3.7% compared to last week.

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July 11th, 2014

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Natural gas futures hit a six-month low yesterday. According to Tim Alford with Armored Wolf, price spikes are not expected to be as large or sustained as long because of the increase in production.  Record production continues to offset the natural gas storage deficit but even with the record injections, storage remains more than 20% less than last year’s levels.

For the first time in 8 straight weeks, the natural gas injection came in below 100 Bcf at 93 Bcf. Forecasts were calling for a 87 Bcf build which is more than last year’s 81 Bcf build and larger again than the five year injection average of 72 Bcf.

Total natural gas consumption fell this week by 1.5 Bcf/day thanks to a 1.6 Bcf/day decrease in power burn. Temperatures in the Northeast, Midwest and Southwest registered cooler temperatures which helped account for the decline.

There are 17 more weeks in the injection season which ends October 31. The EIA increased their forecast for end of October levels from 3,424 Bcf to 3,431 Bcf.

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July 3rd, 2014

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Natural gas storage injections continue for the eighth week at or above 100 Bcf. This week’s 100 Bcf injection was above last year’s 75 Bcf injection and the five year injection average of 68 Bcf but failed to meet the forecasted predictions of 102 Bcf.

The demand for natural gas is in July expected to be lower than normal due to cooler temperatures. For more information on the weather, please see below.

Natural gas supply and production both increased overall. Supply increased at 0.1 Bcf/day for the third week in a row, landing at 73.4 Bcf/day. Total dry production also increased for the third week in a row by 0.1 Bcf/day.

Weather is a neutral market driver mainly because of the start of summer weather and uncertainty around the El Nino event. An El Nino event is correlated with cooler than normal temperatures and a suppressed hurricane season. WSI predicts below normal temperatures July through September for the north-central and northeastern United States. Warmer than normal temperatures are expected in the southeast, but if the El Nino occurs it has the potential to cool down that region of the US.

Please note the natural gas market closed at noon today in anticipation for the Independence Day holiday. Have a great weekend!

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June 27th, 2014

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Weather Services International (WSI) expects no change to the quiet tropical season. This year may likely be the first since 2009 we go into July without one named storm. Regarding temperatures, WSI still expects below normal temperatures across the north-central and northeastern states. Above normal temperatures are expected in the Southeast US and western states. Click image below for the most recent forecast for July – September.

Natural gas storage increased by triple digits for the seventh consecutive week. The injection was 110 Bcf, above the expectations of approximately 104 Bcf. This injection was larger than the 81 Bcf 5-year injection average and larger than last year’s injection of 94 Bcf.

Chris Kostas, with Energy Security Analysis, Inc. (ESAI), predicts natural gas demand in July will be below average due to the cooler-than-normal temperatures expected over most of the country. This should result in relatively soft energy prices – particularly for the Northeast and Midwest markets.

Natural gas production is increasing in the three major tight oil production areas. The Eagle Ford, Permian Basin and Bakken Shale are partially responsible for natural gas production increasing by 5% overall so far in 2014. Since 2011, gas production in these three regions increased by 88%. Natural gas production hit a record high of 68.5 Bcf on Saturday.

Natural gas storage remains low compared to the one and five year averages but the 100+ Bcf builds are helping decrease the deficit. Overall natural gas demand surpassed production. Consumption rose 1.8%- driven by increases in the industrial and power burn sectors.

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June 20th, 2014

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The natural gas injection for this week came in at 113 Bcf, higher than the 110 that was expected. This is the sixth consecutive injection above 100 Bcf. As you saw from last week, injections have increased at a record pace and this week was no different. From the week ending on April 4 to the week ending on June 13, net storage injections have totaled 897 Bcf, versus 725 Bcf for the same 11 weeks in 2013, and 756 Bcf for these weeks between 2009 and 2013, on average (EIA).

With 20 more weeks in the injection season, there is still a lot of pressure to make up for the depletion we saw in natural gas storage this winter.

Weather is getting warmer which increases the demand for natural gas consumed for electric generation or power burn. Though power burn increased, the overall natural gas consumption has decreased for the seventh week in a row.

In the long term:

According to the June ITR report, there will be a slowing in the US economy late 2014 and early 2015. This is due mainly to slowing residential construction, decelerating retail sales and moderating growth in business to business activity.

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June 13th, 2014

Executive Market Summary

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Each Thursday during injection season, the natural gas forecast pressures the market to meet or beat expectations.  This past natural gas storage report was a perfect example of not meeting the lofty goal.  Though expectations were at 110 Bcf, this week’s injection settled at 107 Bcf.  While it is still a healthy number, not meeting or exceeding the projection sent the market to one of the highest single-day increases of the year.

After several weeks of healthy injections beating the one and five year averages, storage remains 727 Bcf less than last year’s record storage level.  The five consecutive triple digit injections are largely due to natural gas production growth and flat-to-declining consumption across the commercial and residential sectors.

In The Long Term:

The EIA’s Short Term Energy Outlook (STEO), released June 11, has slightly revised predictions for overall natural gas consumption in 2014. Originally predicted at a 1.3% increase, the EIA now predicts consumption to increase 1.7% from 2013. This means total natural gas consumption will average 72.5 Bcf/day in 2014. In 2015 that number is expected to drop by 0.2 Bcf/day as the projected near-normal winter weather should lower residential and commercial consumption.

The STEO also revised the inventory number for the end-of-injection-season. Now, forecasters predict the inventory level will be 3,424 Bcf – an increase from 3,405 Bcf predicted in the last STEO edition. In order to arrive at the new level, it would require an average weekly injection of 87 Bcf through the end of October.

Natural gas production is still projected to increase each year due to advancements in drilling technologies and efficiencies. While this is positive news in terms of supply, it also supports both pipeline and liquefied natural gas (LNG) exports in the future.

U.S. exports of LNG are predicted to increase to 3.5 Tcf by 2029 and remain that that level for more than a decade. Please reference the chart on the back page of the executive summary to see the projected growth in LNG take off from around 2015 through 2040.

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