NATURAL GAS INVENTORY (Week Ended 11/28/14)
Current: 3,410 Bcf
Actual Injection/(Withdrawal): (22) Bcf
Economist Average Estimate: (40) Bcf
Previous: 3,432 Bcf
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**All notes from 12/4/14**
BMO Capital Markets
Natural Gas Withdrawal Below Expectations
The U.S. Energy Information Administration (EIA) reported a withdrawal of 22 Bcf, below forecasts of a 41 Bcf withdrawal and below the five-year average of 66 Bcf and last year’s withdrawal of 162 Bcf. U.S. working gas in storage is now at 3,410 Bcf, 9.8% below the five-year average of 3,782 Bcf and 6.2% below last year’s level of 3,637 Bcf. Weather forecasts for the U.S. over the next six to 10 days call for above-average temperatures throughout the majority of the lower 48.
Our View:
- We believe the withdrawal report will be viewed as negative given that it was lower than expectations.
- The natural gas market is clearly comfortable with current storage levels for the upcoming winter heating season given the continued growth in the Marcellus and associated gas production. We believe natural gas prices are likely to drift until winter weather arrives.
KLR Group
Supply/demand trends
- Over the past four weeks, gas-fired power demand has been trending down ~0.7 Bcfpd y/y, while industrial demand has been averaging up ~1 Bcfpd y/y over the past month.
- Over the past month, Canadian net imports are up ~0.3 Bcfpd y/y, Mexican net exports are up ~0.2 Bcfpd y/y, and LNG send-out was down ~0.2 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 well below expectations
Storage fell 22 Bcf, below consensus expectations of 39 Bcf and the UBSe range of a 30-40 Bcf withdrawal. This week’s withdrawal is well below the 162 Bcf withdrawal in the comparable week last year and the 5-year average of a 55 Bcf withdrawal. Inventories are now 3,410 Bcf, narrowing the deficit to the prior year and the 5-year average to 204 Bcf and 368 Bcf, respectively.
Weather last week was warmer than 2013 but colder than the 5-year average
Last week’s weather was 22% warmer than the comparable week last year but 2% colder than the 5-year average. Since September, weather has been 1% warmer than last year but 5% cooler than the 5-year average. Approximately 80% of HDDs remain ahead of us.
Forecast a 30-40 Bcf withdrawal next week
We forecast a 30-40 Bcf withdrawal next week, compared to 2013’s 81 Bcf withdrawal and the 5-year average of a 67 Bcf withdrawal. Over the last month, the weather-adjusted S/D has been 1.9 Bcfd oversupplied vs. last year and 1.7 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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