Natural Gas in Underground Storage

The weekly EIA Natural Gas Storage Report advised that there was an injection of 81Bcf (billion cubic feet) into Underground Storage for the week ending October 12th, 2018.

This is 1Bcf below the median forecast of an 82Bcf injection, the average prediction of sector analysts and traders in the Dow Jones Newswires weekly survey. The injection one year ago was 50Bcf and the 5-year average injection is 79Bcf. Storage is 601Bcf below last year for the same week and 605Bcf below the 5-year average. Working gas in storage stands at 3,037Bcf.

Natural Gas Pricing


As of 9:20AM CST, November 2018, (the prompt month) Natural Gas was trading at $3.24, +$0.03 from one week ago and the 1-Year Spread average was $2.95, unchanged from one week ago.

Crude Oil Pricing


As of 9:17AM CST, November, 2018, (the prompt month) Light, Sweet Crude on the NYMEX was at $69.08, -$2.87 from one week ago.

Crude Oil Inventory


US crude inventories increased by 6.4 million barrels to  416 million barrels for the week ended October 12th, according to data released yesterday morning by the US Department of Energy. Traders in the Reuters poll projected an increase of 2.5 million barrels.

U.S. Rotary Rigs


U.S. Rotary Rigs drilling for natural gas were +4 at 193 for the week of October 12th. The number of rigs currently drilling for Natural Gas was +8 from last year. US Rigs drilling for oil were +8 at 869. There are 126 more rigs targeting oil than last year. Canadian rigs were +13 at 195 for the week. Rigs targeting oil remain 82% of all US drilling activity.

Geopolitical


China prepares for life without US LNG: On 24 September, China released a second list of goods which will attract a 10% tariff on imports from the US. Interestingly, LNG did not feature in the first list, but it was included in the second. China also indicated that it may eventually impose a 25% tariff on the US LNG imports. In this piece, we examine how China is preparing to cope without US LNG imports, and what are the implications for US LNG exporters given this recent move.

In 2017, Chinese LNG imports from the US created theoretical demand for just five LNG carriers, so it could be argued that the imposition of a tariff on LNG imports from the US is more symbolic than material. Certainly, imports from the US will be more expensive, as a 10% tariff will push the costs of US LNG to over $11.00/MMBtu. At this price Chinese buyers will look for alternatives, which is precisely the purpose of tariff. To this end, China is already.

Weather

The AccuWeather 1-5 day Outlook forecasts below-normal temps for the Northeast quarter of the US  and Texas plus the surrounding states. The Northwest and Southeast look to be above-normal. The 6-10 Day Outlook shows a similar forecast.

11-15 Day Outlook  forecasts Florida, Texas and much of the South-Central US at below-normal temps with above-normal temps for California, Nevada and parts of other Western states. The 30-day Outlook projects normal temps for most of the US with the exception of the Southeast coastal states and a small part of the West, which are expected to be at above-normal temperatures. There will also be below-normal temps for a swath of the Central states.

The 90-Day Outlook shows normal temps for the entire country, with the exception of the Northeast and Far-North Central States, which are expected to be above-normal.

Sustainability and Renewables


Converting Heat Directly into Electricity: Around the world, a vast amount of heat energy is wasted on a daily basis. And yet waste heat represents an enormous and nearly untapped source of plentiful low-cost energy. The largest contributions to this potential energy pool come from electricity generation, transportation, and industrial processes. Current approaches to energy recapture are large, costly and complex, so more than 95% of manufacturing waste heat has no energy recovery solution deployed to capture it. The result – most industrial waste heat is allowed to escape into the atmosphere. A new approach is required to address the capture and conversion of this large and valuable energy resource.

60%:    Energy lost as heat
               
95%:    Waste heat untapped

14GW: Wheat energy waste

15M:     Homes powered

*US manufacturing and household energy data

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This Week's Key Take-Away


NYMEX Crude has dropped below $70 as inventory has ballooned. The pause in pumping in the Gulf of Mexico due to Hurricane Michael was offset by the demand destruction on land and had little affect on overall crude production.

Interesting then that Natural Gas has been trading in a narrow bandwidth around $3.30, bearing in mind that 3 months ago, it was trading below $2.80. This $0.50 movement in Natural Gas translates to approximately a $0.005 rise in electric prices. However, we have seen a greater rise than that in retail pricing, even as Heat Rates have dropped. The reason (technical) is the concern that Natural Gas prices could rise even more, should winter cold be in excess of current predictions. With Natural Gas inventory over 600 Billion Cubic Feet below last year, Retail Energy Providers are hedging their bets against a significant rise in prices as US temps and inventory drop.

There used to be a correlation between Natural Gas prices and Crude prices, as there is a 6-1 (Btu) ratio relationship between Crude and Natural Gas. With Crude at $69, Natural Gas should be at $11.50. But the 2 no longer move in lock-step and are in fact, decoupled at this point. Crude used to drag Natural Gas with it but we now see that this is no longer the case.

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