January 17th Market Update

Published: January 17, 2019

Reasons to Buy:

  • Weather normalized demand continues to grow. 

o   “Total U.S. natural gas consumption averaged an estimated 81.6 billion cubic feet per day (Bcf/d) in 2018, and EIA expects it to increase by 1.1 Bcf/d (1.3%) in 2019 and then increase by a further 0.9 Bcf/d (1.1%) in 2020.” – Total US Gas Consumption - EIA Short-Term Energy Outlook (STEO) January 2019  

o   “EIA expects the share of U.S. total utility-scale electricity generation from natural gas-fired power plants to rise from 35% in 2018 to 37% in 2020.” - EIA STEO January 2019  

o   Gas exports continue to increase:

  • EIA projecting net exports to increase from 2.1 Bcf/d in 2018 to an average of 6.2 Bcf/d this year.
  • Mexican exports averaged 4.7 Bcf/d for 1/3 – 1/9 (9.3% higher than last year.)
  • LNG pipeline receipts averaged 5.0 Bcf/d for 1/3 – 1/9 (108% higher than last year.)
  • “EIA forecasts that U.S. LNG export capacity will almost double by the end of 2019 to 8.9 Bcf/d once new trains at Cameron LNG, Freeport LNG, and Elba Island LNG are commissioned, making U.S. LNG export capacity the third largest in the world behind Australia and Qatar.” – EIA STEO January 2019

o   Colder weather projected for end of January.

  • Initially expected to be a short burst of cold, however recent forecasts are indicating that the severe cold may persist.

Reasons to Wait:

  • Production continues to grow, the market could reverse quickly if demand can’t keep up.

o   Production

  • 202 gas rigs (+4 since last week) vs. 187 gas rigs last year.
  • “U.S. dry natural gas production averaged a record high 83.3 billion cubic feet per day (Bcf/d) in 2018. EIA forecasts dry natural gas production will average 90.2 Bcf/d in 2019 and 92.2 Bcf/d in 2020.” - EIA STEO January 2019
  • Dry production for 1/3 – 1/9 averaged 87.4 Bcf/d (16.8% higher than last year at this time.)
  • Gas production out of the Big Seven (Anadarko, Appalachian, Permian basins and Bakken, Eagle Ford, Haynesville and Niobrara shales) has increased every month since January 2017.
  • Forecasted to reach 76.916 Bcf/d in January, up from 75.789 Bcf/d in December.

o   Demand

  • Tomorrow’s report expected between 55-100 Bcf, significantly smaller than both last year (208 Bcf) and the 5 year average withdrawal (218 Bcf.)

 

 

Gas Market Highlights:

  • Last week was the 9th storage report and 8th withdrawal of the 2018-2019 Withdrawal Season.  Withdrawal (91 Bcf) was within analysts’ expectations (25-115 Bcf).  Storage is now 204 Bcf below last year’s level and 464 Bcf below the 5 year average. 

o   Year over year deficit has decreased 54.7.6% since the previous week.

o   Deficit under 5 year average has decreased 17.1% since the previous week.

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