Posted: Nov. 21st 2019
Research – Natural Gas Storage Report – 21 November 2019
US natural gas inventories declined by 94 Bcf for the week ending November 15, compared with the five-year (2014–18) average net withdrawal of 32 Bcf and last year’s net withdrawal of 109 Bcf during the same reporting week. Working gas stocks total 3,638 Bcf, which is 60 Bcf lower than the five-year average and 506 Bcf higher than last year at this time. Analyst expectations had been for a withdrawal of 90 Bcf. The withdrawal marked the largest withdrawal in history for this specific reporting week. The below normal temperatures that most of the major consuming areas of the country experienced for the week ending 11/15 resulted a dramatic increase in heating degree days. While the cold weather brought about a surge in daily spot gas pricing and caused a brief increase in futures, the cold wasn’t sustainable and a return to more normal conditions has been evident this week. Outlooks for the week of Thanksgiving and for the first part of December also appear fairly mild. Expectations are for a small withdrawal both in next week’s report and the following week’s report at this time. The December NYMEX contract will expire on Tuesday. The contract has major support at the $2.48-$2.49 level and resistance at the $2.64-$2.65 level. Unless a major fundamental shift occurs in weather outlooks over the weekend, the December contract is likely to expire in this range. With daily production still near a record high of 95 BCF/day and working gas in storage at adequate levels, the risks in pricing in the short-term for the Jan-Mar contract months will be primarily weather driven. Warmer weather will certainly push prices lower and may further impact production estimates in 2020. With shale production companies reporting less than stellar Q3 earnings, the focus of many producers is on slashing CapEx spending and to reduce drilling budgets. With demand expected to increase due to new LNG projects that are coming online and with continuing coal-fired generation being retired, it would appear that it’s possible that the gas market could finally start to show signs of tightening in 2020. This tightening of the supply and demand imbalance would likely help support an increase in longer-dated NYMEX price curves. With cal 20, 21, 22, 23 and 24 all currently trading at around $2.50, the recommendation remains to hedge some open exposure at these very attractive levels.