As natural gas inventories look to exit the season in the low 800's, high gas production and lower power generation demand should loosen the supply/demand balance through the shoulder season. But the massive inventory deficit is unlikely to refill by autumn, because a tighter gas trade balance and the impact of coal plant retirements should tighten the market as summer demand materializes.
Here are the key variables in the inventory projections, and the expected monthly levels relative to 2013. Canada will be forced to redirect exports to refill its own domestic inventories, and the broad consensus is for Mexican demand to increase by 200-300 MMCFD. Production and Electric Generation demand are less certain, with weather and pipeline projects have an impact on the timing and extent of any increases.
These projections show autumn inventories peaking at < 3.3 TCF, a level that will likely provide support to summer gas prices. Mild weather and swelling production are the bearish risks to gas prices in this scenario.
