Natural Gas in Underground Storage

The weekly EIA Natural Gas Storage Report advised that there was an injection of 86Bcf (billion cubic feet) into Underground Storage for the week ending September 14th, 2018.

This is 5Bcf above the median forecast of a 81Bcf injection, the average prediction of sector analysts and traders in the Dow Jones Newswires weekly survey. The injection one year ago was 97Bcf and the 5-year average injection is 76Bcf. Storage is 672Bcf below last year for the same week and 586Bcf below the 5-year average. Working gas in storage stands at 2,722Bcf. Lower 48 production reached another all-time high over this past weekend.

Natural Gas Pricing


As of 9:46AM CST, October 2018, (the prompt month) Natural Gas was trading at $2.92, +$0.07 from one week ago and the 1-Year Spread average was $2.79, +$0.02 from one week ago.

Crude Oil Pricing


As of 9:47AM CST, October, 2018, (the prompt month) Light, Sweet Crude on the NYMEX was at $70.81, +$1.16 from one week ago.

Crude Oil Inventory


US crude inventories decreased by 2.1 million barrels to 394.1 million barrels for the week ended September 14th, according to data released yesterday morning by the US Department of Energy. Traders in the Reuters poll projected a drop of 2.7 million barrels. Crude inventory fell for the 5th straight week. It has now dropped to its lowest level since early 2015.

U.S. Rotary Rigs


U.S. Rotary Rigs drilling for natural gas were unchanged at 186 for the week of September 14th. The number of rigs currently drilling for Natural Gas was the same as last year’s level of 103. US Rigs drilling for oil were +7 at 867. There are 118 more rigs targeting oil than last year. Canadian rigs were +22 at 226 for the week. Rigs targeting oil remain 82% of all US drilling activity.

Geopolitical


U.S. sanctions crippling Iran oil exports: With nearly 50 days still to go before new U.S. oil sanctions against Iran officially take effect, Pres. Trump already has managed to crush Iran’s oil exports, plunging +35% to 1.6M bbl/day from 2.5M just since April.

Oil accounts for nearly 80% of Iran’s tax revenue, making it the country’s economic lifeblood, and as oil exports have plunged, Iran’s currency has plummeted 60%, pushing up inflation.

With early indications that European nations and Japan soon will stop buying Iranian crude altogether, analysts say the country’s exports easily could drop by another 350K bbl/day by November to 1.3M; South Korea, a major importer of Iranian crude in the past, has not shipped any oil from Iran for 75 days.

Iran is not just losing customers for its crude, as under earlier sanctions, but also for condensate; total Iranian exports of condensate fell 40% in the first half of September from April to 175K bbl/day.

Weather

The AccuWeather 1-5 day Outlook forecasts above-normal temps for most of the US with the exception of part of the Southwest, New England, Southern Florida and the North, from Lake Michigan to Washington. The 6-10 Day Outlook shows the East and West at above normal Temps with the Central US at below-normal temps.

11-15 Day Outlook  forecasts the Northeast and most of the Northern US at above-normal temperatures with normal temps for the Northwest and Western US. The balance of the country is projected at normal temps. The 30-day Outlook projects normal temps for most of the US with the exception of the Northeast  and the balance of Far-Northern states, which are expected to be at above-normal temperatures.

The 90-Day Outlook shows normal temps for the entire country, with the exception of the Northeast, which is expected to be at above-normal temps.

Sustainability and Renewables


The world's first hydrogen train is now in service; Two Coradia iLint trains have begun running a line in northern Germany: The world's first (and second) hydrogen-powered trains have entered service in northern Germany, marking the start of a new era for sustainable travel.

Two Coradia iLint trains, made by Alstom, have begun working the line between Cuxhaven and Buxtehude just west of Hamburg. Until now, the nearly 100km-long line has been serviced by diesel trains, but will now play host to near-silent engines.

We wrote the first iLint prototype at Alstom's German facilities earlier this year, and found the experience not to dissimilar to that of a diesel train. That is, however, the point, Alstom has made the vehicles so that they operate in the same way as the existing fleet to avoid any culture shock for passengers and crew. Except that they need to refuel their 1,000km capacity tanks at a dedicated H2 fueling station located at Bremervorde.

This Week's Key Take-Away


Natural Gas prices have risen following Hurricane Florence, due mostly to pipeline damage in the East. We expect this trend to reverse itself over the next few weeks unless the weather prediction turns colder-than-normal for the next few months.

While the inventory report was higher than expected and 17Bcf higher than last week, it was still below last year's injection, causing a further deficit vs. 2017's inventory. Spot electricity prices have remained low in most markets.

It is very difficult to read which way Natural Gas prices will go over the next 30 days. They should drop, as the "shoulder months" usually mean less usage. Additionally, the US is at all-time highs in Natural Gas production. There has also been demand destruction due to the hurricane. That said, increases in LNG shipments and pipeline limitations could send prices up this fall. We will continue to carefully monitor the market.

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