NATURAL GAS INVENTORY (Week Ended 12/05/14)
Current: 3,295 Bcf
Actual Injection/(Withdrawal): (64) Bcf
Economist Average Estimate: (61) Bcf
Previous: 3,359 Bcf
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ANALYST COMMENTARY
**All notes from 12/18/14**
KLR Group
Storage overview
The EIA reported a 64 Bcf storage draw, 2 Bcf above our 62 Bcf estimated draw and 3 Bcf above the 61 Bcf consensus draw.
The East region showed a 55 Bcf draw, the Producing region showed a 10 Bcf draw and the West region showed a 1 Bcf build. Storage stands at 3,295 Bcf, ~1% above last year and ~7% below the five-year average. The data suggests the market is ~1.5 Bcfpd oversupplied on a weather-normalized quarterly moving average basis. Notably, gas was up~$0.03 following the storage report.
Supply/demand trends
Over the past four weeks, gas-fired power demand has been trending down ~2.5 Bcfpd y/y, while industrial demand has been averaging up ~0.9 Bcfpd y/y over the past month.
Over the past month, Canadian net imports are down ~0.3 Bcfpd y/y, Mexican net exports are up ~0.4 Bcfpd y/y, and LNG send-out was down ~0.1 Bcfpd y/y.
In ’15, we anticipate gas-fired power generation should increase approximately 0.5 Bcfpd driven by a regulatory diminution in coal-fired power generation.
Recent EIA U.S. supply data indicates September production averaged ~71.8 Bcfpd. We anticipate U.S. supply exits ’14 at ~72.8 Bcfpd. Rig activity is currently ~345 rigs and we expect an average of ~330 rigs in ’14.
UBS Investment Research
Storage withdrawal above expectations
Storage fell 64 Bcf, above consensus expectations of 60 Bcf and the UBSe range of a 50-60 Bcf withdrawal. Nonetheless, this week’s withdrawal is still below both the massive 285 Bcf withdrawal in the comparable week last year and the 5-year average of a 168 Bcf withdrawal. We estimate inventories decreased to 3,295 Bcf, flipping the deficit vs. last year to a surplus of 47 Bcf while narrowing the deficit vs. the 5-year average to 249 Bcf.
Weather last week was warmer than 2013 and the 5-year average
Last week’s weather was 35% and 20% warmer than the comparable week last year and the 5-year average, respectively. Since Sept, weather has been 8% warmer than last year but 1% colder than the 5-year average. Approximately 71% of HDDs remain ahead of us.
Forecast a 55-65 Bcf withdrawal next week
We forecast a 55-65 Bcf withdrawal next week, compared to 2013’s 177 Bcf withdrawal and the 5-year average of a 136 Bcf withdrawal. Over the last month, the weather-adjusted S/D has been 2.8 Bcfd oversupplied vs. last year and 2.0 Bcfd oversupplied vs. 5-year average. Given the current weather-adjusted oversupply, we forecast storage to exit the winter at 1.8 Tcf (above the 5-year average of 1.71 Tcf).
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