With what will more than likely be the final build before the withdrawal season, the EIA report provided a slightly bearish storage injection of 65 Bcf that exceeded all market expectations ranging from 56 Bcf to 59 Bcf, along with the historical values of 22 Bcf from last year and the five-year average of 48 Bcf. The NYMEX December contract kicked off the week with a nearly $0.25/MMBtu hike to the $3.50/MMBtu range due to forecasts of prolonged below-normal temperatures potentially slotted for the next couple of weeks paired with the lingering presence of multi-year low storage inventories. Despite record dry gas production expectations (94.32 Bcf/d for Q4 in 2018 and 95.78 Bcf/d for Q1 in 2019) from EIA’s most recent Short Term Energy Outlook, demand & consumption, increases in LNG exports, and fuel reliability concerns in NYISO and ISO-NE are making a strong case for a bumpy road as heating loads begin to pick up in the near future. Utility-scale electricity generation currently utilizes natural gas for approximately 35% of its mix across the United States, and that percentage is only going to go up over the next year, albeit at a slower rate due to solar electricity generation chugging along as the fastest-going renewable energy source at the same time, per S&P Global Platts. An overall warmer winter on average may be coming, but any cold shots over the next few months, especially if they find their way to the Northeast, could be cause for concern.
Working natural gas in storage currently stands at 3,208 Bcf, which is 580 Bcf (15.3%) lower than this time last year and 621 Bcf (16.2%) lower than the five-year average.
The December 2018 NYMEX Futures price began the day around $3.55/MMBtu prior to the report’s release, but has since dropped to $3.52/MMBtu after the report was posted.
Outlook for the Balance of Storage Season:
The graph below compares historical 12, 24 and 36 month strip prices and storage levels for the past 5 years.
The following table shows the injection numbers we will need to average by week to hit selected historical levels:
The following two graphs show current natural gas in storage compared to each of the last 5 years and weekly storage averages and patterns.
The graph below shows the injections through the current week over the past 5 years.
Finally, the graphics below depicts the 6 to 10 day temperature range outlook from the National Weather Service.
Current Week’s Outlook