natural gas

natural gas

Tuesday, May 3, 2016

Natural Gas Corner - Market Update - Bull Versus Bear

Natural gas price regained their footing in today's session as buyers stepped in at the lower-2.000 level bidding the spot June 16 spot longer dated contracts back higher.

Recent weakness in the market has centered around a cooler start to May than originally forecast is the southern U.S., a high usage region of natural gas for summer cooling. 

Supportive factors for the market are longer term summer forecasts calling for above-normal temperatures across much of the U.S.  This in turn is expected to ramp up natural gas usage for power generation above 30 Bcf per day, a record high over this upcoming summer, if correct. 

Another supportive factor is falling U.S. production which has declined by 3.3 Bcf per day or 4.5% since February to a current level of 70.5 Bcf per day (dry-gas) according to Bentek/Platts.  The falling rig count which has declined by 95% to 87 rigs since 2008 may be finally lowering domestic production.

But overwhelming both the bullish factors discussed above is storage which finished this past winter at a near record high 2,468 Bcf.  Although only 89 Bcf of gas has been injected over the first 4 weeks of the injection season (11% below the 5-year average and 60% below 2015), gas in storage by the end of the year is expected to be at or above last year's 4,009 Bcf mark, an all-time high.

The market could continue to chop sideways to possibly higher over upcoming weeks but should again begin to trade back toward early year lows once uncertainties regarding this summer's cooling demand are resolved.

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