There seems to be nothing that will change the continued trend of the increasing amounts of natural gas being injected in the storage system. We won’t go into all the various reasons in detail as it has been covered in previous posts. Mild weather, moderate hurricane season and the continued high production levels of natural gas producers… that’s it in a nutshell.
Working gas in storage increased by 85 Bcf to a total of 3,499 Bcf as of Friday, October 1, 2010, according to the US Energy Information Administration (“EIA”) estimates. Analysts polled by Platts were expecting a net injection of 74 billion to 78 billion cubic feet.Stocks were 149 Bcf less than last year at this time and 220 Bcf above the 5-year average of 3,279 Bcf. At 3,499 Bcf, total working gas is within the 5-year historical range but certainly well into the top half of this range.
Last year at this time, natural gas in storage was above the 5-year historical range. Net injections into storage were “more then expected” and a late start to the winter heating season saw natural gas approach its physical storage capacity of ~4,000 BCF.
Basic numbers would suggest that if net increases were on average 70 Bcf, the US would reach its physical storage capacity around in 6-7 weeks in late November, early December. The winter heating season officially starts on November 1st, and last year’s “late start” was November 10th. The bottom line here is there is low risk of natural gas hitting storage capacity, and high probability that the winter heating season (late or not) would begin to reduce net injections and subsequently draw down on inventories.
And as stated many times before, shale gas production should not be cut but increased, along with the increased usage of natural gas within our transportation and power generation networks.
US natural gas in storage increased by another 78 Bcf for a total of 2,840 Bcf in storage as of Friday, July 9, 2010, according to Energy Information Agency (“EIA”) weekly report. At this level stocks were 33 Bcf less than last year at this time and 274 Bcf above the 5-year average of 2,566 Bcf. Natural gas prices are trading up as this increase is on the lower side of what was predicted. Analysts polled by Platts were predicting an increase of 78 to 82 Bcf. So what.
As HRN has been posting for some time now, natural gas prices are likely to remain in and around current trading prices for some time. June was one of the hottest months in years in North America, with a number of record highs. Yet, natural gas prices did nothing because the heat wave didn’t put a dent in the storage numbers. Again, if you are comparing today’s natural gas storage numbers to the numbers last year for the same time… dont. Last year supplies were high so being slightly under the high storage numbers of last year is no indication of declining supplies to push up prices. US storage numbers are 274 Bcf above the 5-year average. That is the number to read.
However, it is important that we always premise that low natural gas prices and high supply and resources are not the problem. They are the opportunity and solution. Canada and the US should increase their usage of natural gas in transportation and electric power generation. Natural gas is the single most important fuel source for meeting energy demands while lowering carbon emissions and US dependence on foreign oil. There is really no argument here. As we always say on HRN… the road to get to a green sustainable future is paved in fossil fuels. There is no other way. However, out of the viable fossil fuels natural gas has the lowest carbon footprint with emissions that are ~50% less then coal, and ~30% less then diesel/oil. Natural gas is cleaner, more affordable, proven, and abundent in North America.
Yes, we may see another summer heat wave yet… likely in fact. However, as long as net injections are adding billions of cubic feet of gas into the storage system, supplies will likely not be impacted by another heat wave. Yes, there may be some serious disruptions from an active hurricane season. If disruptions occur at the same time as a major heat wave hits a broad area of northeastern US, this could impact supplies and start a draw down on existing inventories. There are a lot of “ifs” to have that happen.
US natural gas in storage increased by another 81 Bcf for a total of 2,624 Bcf in storage as of Friday, June 18, 2010, according to the US Energy Information Agency (“EIA”) report yesterday. Perhaps the good news here for those closely watching the prices of natural gas is that inventories are now 14 Bcf less than last year at this time. But before any predictions are made, one has to remember that last year was a terrible year for natural gas prices. Last year elevated inventory levels raised concern over a supply glut and kept prices down. Lower inventories then last year at the same time may be an early indiction to keep an eye out and see if this is the start of a trend. Once something trends and forms a pattern then predictions can perhaps be outlined. On the other hand it is a very small amount of natural gas in the grand scheme of things and a figure that could easily swing the other way next week.
Inventories remain 309 Bcf above the 5-year average of 2,315 Bcf.
Sorry for the delayed post.
This past Thursday, the EIA announced that US natural gas in storage increased by 87 Bcf, to a total of 2,543 Bcf in storage as of Friday, June 11, 2010. Stocks are 2 Bcf higher than last year at this time and 313 Bcf above the 5-year average of 2,230 Bcf.
Being only 2 Bcf above last year’s inventory levels may seem reasonable. You may recall that last November the US was pushing up to their physical storage capacity which sits at about 4,000 Bcf, after inventory levels were too high, had a moderate summer, and a delayed winter heating season. Bottom line is – as always – is natural gas inventory levels will only come down if weather conditions increase consumption, or producers decrease production. Weather is hard to predict but the US weather forecast is for an “active hurricane” season. (the last thing the Gulf region needs). Producers are in a very difficult position, having to develop shale gas properties that they invested primium dollars to acquire. They must advance their properties or risk losing their land lease.
Unless we start to see the beginning of a very hot summer in the northeast USA, or a disruptive hurricane season in the Gulf (which no one wants), it will likely be sometime before we see a drawdown in US natural gas storage. Without a doubt there will be some hot days and some drawdown at some point. The key will be if there will be enough to bring inventory levels down to historical levels before we enter moderate autumn conditions. We may be entering a period of higher acceptable storage levels and new increased storage capacity that would accomadate a increased usage of natural gas within the overall energy mix.
Right now natural gas traders are speculating and trading on the weather – which they always do.
Natural gas in storage increased by 99 Bcf from the previous week to a total of 2,456 Bcf as as of Friday, June 4, 2010, according to Energy Information Agency (“EIA”) estimates. Stocks were 28 Bcf higher than last year at this time and 310 Bcf above the 5-year average of 2,146 Bcf. Analysts polled by Platts had predicted an increase between 91 and 95 Bcf.
Nothing to add that we have not stated in previous articles on the subject.
Today, the Energy Information Agency (“EIA”) reported that natural gas in US storage increased by 88 Bcf to reach a total of 2,357 Bcf as of Friday, May 28, 2010. Down from the 104 Bcf added to storage the previous week but still 306 Bcf above the 5-year average of 2,051 Bcf.
For months we have been writing on the Horn River News about the curse and blessing of shale gas. The good news is there is a massive amount of natural gas in North America due to the ability to unlock the resource from tight shale gas formations. The bad news there is a massive amount of natural gas. This was coupled with the fact that the shale gas boom came about at the worst possible time. As the saying goes… “timing is everything”. Reduced demand from a recession, and an increase in supply took natural gas prices down to new lows. But that is not the curse. Its part of the blessing. And the sooner we realize this and take advantage of natural gas as an affordable, cleaner fossil fuel the better.
During 2005, natural gas prices were heading towards $16 because of supply disruptions caused by Hurricane Katrina, and Rita. Natural gas prices have always been effected by weather. Colder then normal winters drive up demand for heat, and hotter then normal summers drive up demand for air conditioning. Both made possible through the consumption of natural gas. Add to the weather impact the effect of the “hurricane season” which runs from June 1st to November 30th. On May27th when the EIA announced an increase of natural gas in storage of 104 Bcf, the National Oceanic and Atmospheric Administration (NOAA) Climate Prediction Center announced their hurricane forecast and outlook that predicts the 2010 hurricane season will be an “active to extremely active” one. So the market is speculating based on the NOAA prediction and were up.
At the same time the fact remains that supplies are well above 5 year average and production continues to go up. Natural gas producers are in a very challenging position. Going back to 2007 there was a bidding war for shale gas assets. Companies made huge capital investments into acquiring land leases for shale gas plays. These companies are forced to develop these plays in order to maintain the leases and avoid losing their original capital investment. The end result is that we are seeing an increase in production during a shoulder season in advance of the summer cooling season and hurricane season which is taking storage levels to above average numbers.
A disruption in natural gas supplies from an active hurricane season can quickly draw down storage numbers but it is really the last thing anyone really wants right now. British Petroleum (“BP”) and the US have their hands full trying to clean up the Gulf and some cooperative weather conditions would be welcome. Time will tell.
National Weather Service: 2010 Atlantic Hurricane Season Outlook
Natural gas in US storage increased by 76 Bcf to a total of 2,165 Bcf as of Friday, May 14, 2010, according to Energy Information Agency (“EIA”) estimates. As previously reported here on HRN the real number to watch is the 5-year average. At 2,165 Bcf inventories are 308 Bcf above the 5-year average of 1,857 Bcf with natural gas producers still injecting into the system.
We don’t want to sound like a broken record, but North America needs to use more natural gas. The amount of natural gas in North America, current production rates, stable low prices and comparatively lower carbon emissions to coal and oil make natural gas an attractive energy source.
US natural gas in storage increased by 83 Bcf to a total of 1,995 Bcf as of Friday, April 30, 2010, according to Energy Information Agency (“EIA”) estimates. Stocks are now 97 Bcf higher than last year at this time and 315 Bcf above the 5-year average of 1,680 Bcf. Analysts polled by Platts had expected an increase between 80 to 84 Bcf. Natural-gas futures for June delivery dipped to $3.88 which is near a six-week low.
Nothing to add that has not already been said in previous weeks here on HRN.
Working gas in storage increased by 83 Bcf to a total of 1,912 Bcf as of Friday, April 23, 2010, according to Energy Information Agency (“EIA”) estimates yesterday. Analysts forecast an increase of 70 Bcf. Stocks are now 101 Bcf higher than last year at this time and 303 Bcf above the 5-year average of 1,609 Bcf. At 1,912 Bcf, total working gas is above the 5-year historical range.
Last week’s increase of 83 Bcf was considerably more then expected. And as supply goes up, prices go down. And perhaps more concerning is that there seems to be no slow down in production as monthly output was up. According to Baker Hughes Inc. the number of natural gas rigs drilling is up 44% from a seven-year low back in July. There were 956 rigs drilling last week.
Producers will need to consider shutting in wells in order to reduce production output. For many this is very challenging as producers must maintain expensive land leases or risk losing them – a loss that can not be justified. So they continue to drill shale gas targets that deliver massive initial production and continue to inject above average amounts of natural gas into the system.
Working gas in U.S. storage increased by 73 Bcf to a total of 1,829 Bcf as of Friday, April 16, 2010, according to Energy Information Agency (“EIA”) estimates. Stocks were 95 Bcf higher than last year at this time and 286 Bcf above the 5-year average of 1,543 Bcf. At 1,829 Bcf, total working gas is above the 5-year historical range.
But despite all this natural gas in storage, natural gas futures were up based on the 73Bcf being less then expected, which might be an indication of production cuts or a one-off situation where analysts over estimated the expected increase.