pArticles Executive Market Summary

July 18th, 2014

Executive Market Summary

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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

Executive Market Summary

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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

Executive Market Summary

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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

Executive Market Summary

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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

Executive Market Summary

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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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June 6th, 2014

Executive Market Summary

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So far in June, we have seen normal to slightly above normal temperatures across most of the country. Aside from the slight revision for June, WSI forecasts a cooler than average summer and believes the emerging El Nino activity will reduce hurricane numbers.

The warmer temperatures are helping to continually decrease overall natural gas consumption in residential and commercial sectors. Consumption declined for the fifth week in a row, by 0.4 Bcf/day.

The natural gas injection was 119 Bcf, above expectations in the range from 114 to 118 Bcf. This was the fourth consecutive injection in the triple digits and the fifth largest injection in EIA records.

Despite a reduction in consumption, power burn continues grow – largely due to natural gas power plant demand increases in Texas and the Southwest. Production decreased slightly by 0.2 Bcf/day to 72.8 Bcf/day.

In order to reach the EIA’s projected storage number of 3,405 Bcf, we must average an 87 Bcf injection for the remaining 22 weeks in the injection season.

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May 30th, 2014

Executive Market Summary

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Summer is quickly approaching, meaning weather will remain the largest driver in the natural gas market. The WSI forecast still calls for a cooler-than-average summer, a below-average hurricane season and an El Nino event.

This week’s natural gas injection was 114 Bcf, which was within the range of estimates at 110-115 Bcf. This was the largest injection since 2009 and the third consecutive injection of the season. Forecasts for next week’s report are near 120 Bcf. Just like last week, a large injection forecasts puts a lot of pressure on the market to make or beat the forecasted number.

Natural gas production remains high and is about 4.6% greater than the same week last year.

Overall demand has been declining, largely due to lower usage in the residential and commercial sectors offsetting the increased demand for power plants (power burn).  However, as summer begins, power burn should continue to increase, along with demand for natural gas.

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May 23rd, 2014

Executive Market Summary

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The 2014 Atlantic Hurricane Outlook was released yesterday by the National Oceanic and Atmospheric Administration (NOAA). There is anticipation of an El Nino developing this summer which reduces the number and intensity of tropical storms and hurricanes. The outlook calls for a 50 percent chance of a below normal season – good news for any offshore drilling. Also, as you know from last week, WSI is expecting the coolest summer since 2009.

The natural gas injection this week came in at 106 Bcf, higher than the expected 100 Bcf. With the adjustment from last week this is the second week of injections in the triple digits. Forecasts for next week’s report are around 115 Bcf which puts a lot of pressure on the market. If we don’t reach the anticipated build, natural gas pricing will rise.

Production continues to increase while consumption decreases overall. A large part of the consumption decreasing this week was thanks to power burn decreasing by 2.6 Bcf a day.

Analysts had previously expressed disappointment in the injections thus far. With 24 weeks remaining in the injection season, injections will need to average 89 Bcf/week in order to reach the forecasted end-of-October levels of 3,405 Bcf. Storage remains low and, again, will be a bullish factor until the levels reach average numbers.

The long term remains the same from last week.

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May 16th, 2014

Executive Market Summary

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As explained last week, Weather Services International (WSI) is predicting the coolest summer since 2009 for the United States. The less time residential and commercial sectors use their air conditioners, the less demand there is for natural gas to fuel power plants (especially in the Southern states).

The natural gas injection this week was 105 Bcf, including a plus 8 Bcf revision from last week’s numbers – leaving the implied injection at 97 Bcf. Optimistic analysts were expecting the first triple digit build of the season with a general consensus of around 98 Bcf.

Since storage still remains so much below the one of five year average, analysts are expressing disappointment in the injections this season. Forecasters predict that we will need to refill about 90 Bcf per week on average in order to reach the EIA’s forecasted inventory level of 3,405 Bcf.

Natural gas production reached a record high of more than 68 Bcf/day this week. Production increased significantly in the Marcellus Shale and in the Gulf Coast region. Production is increasing and consumption continues to decline. For the second week in a row, total consumption in the residential and commercial sectors declined. Power burn is up, but thankfully the decrease in residential and commercial consumption exceeds the increased power burn for the first time this week.

On the very long term, natural gas production is set to outpace consumption. In the EIA’s revised Annual Energy Outlook, natural gas grows by an average rate of 1.6% a year from 2012 – 2040 which is double the 0.8% annual growth rate of total US consumption for the same period.

Though the growth in production will outpace the growth in consumption overall in the coming years, we still have to account for the fact that the US will begin exporting natural gas and those LNG exports will help support higher natural gas prices – particularly in the 2015-2018 period. Also, please note that overall consumption in 2014 is expected to increase by 1.3% from 2013 (EIA Short Term Energy Outlook).

As coal-fired power plants continue to retire, natural gas will be the fuel most often used to replace the coal. Additionally, natural gas used to fuel heavy duty vehicles increases from 40 Bcf in 2012 to 850 Bcf in 2040. 2040 is far out but natural gas shows the largest percentage growth of any other fuel in the Annual Energy Outlook. It is something to keep in mind for the coming years.

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