Thursday, November 10, 2016

Warm Forecasts Compound Natural Gas Woes

Natural gas inventories rose by 54 BCF as reported by the EIA today.  This brings inventories to record levels, with one more injection yet to come before storage begins declining.  The short range weather forecast portends more pain for gas prices before the hope of a normal winter could bring meaningful demand.

Today's injection is on par with last year's +55, though weather was much warmer this year. It marks the fourth week that inventories have failed to shed excess levels, after six months of weekly reductions in the storage surplus.  

Last year saw 70 gas-weighted HDDs in the storage week, compared to this year's 55 HDDs, so today's 54 BCF injection still suggests a tighter supply-demand balance.  However the near term forecast from the CPC indicates at least two more weeks of unimpressive storage reports.

If this forecast verifies, it would put us at about 2/3 of normal HDD load through 11/16, which is frankly more than 100 BCF of lost demand season-to-date (adjusting for various offsets in electric and industrial demand.)