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Gas ticks back toward $3 following Thursday storage spike

Natural Gas Prices (US$/Mcf)

Commodity
Front Month
12 Month
Cal 18
Henry Hub
% Change
$3.04
D
3.4
M
7.8
Y
5.3
$3.07
D
1.8
M
4.5
Y
1.0
$3.16
D
0.7
M
1.7
Y
0.9
Dominion South
% Change
$1.77
D
0.0
M
8.6
Y
45.5
$2.17
D
0.4
M
1.8
Y
18.0
$2.15
D
0.0
M
0.0
Y
4.1
UK NBP
% Change
$5.81
D
1.4
M
14.6
Y
37.0
$5.82
D
1.1
M
4.4
Y
17.9
$5.84
D
0.1
M
3.3
Y
8.8
Japan LNG
% Change
$5.85
D
0.9
M
7.3
Y
17.0
$5.13
D
0.6
M
6.0
Y
3.8
-
D
0.0
M
0.0
Y
0.0
Source: ICE

Key Regional Natural Gas Spot Prices (US$/Mcf)

Dominion S.
% Change
$1.47
D
7.0
M
21.8
Y
21.5
New York
% Change
$2.33
D
30.9
M
13.4
Y
59.6
Alg. Citygate
% Change
$1.75
D
17.1
M
34.5
Y
38.2
TETCO-M3
% Change
$1.34
D
18.8
M
34.0
Y
7.2
FGT Z3
% Change
$2.91
D
0.5
M
6.4
Y
1.6
Henry Hub
% Change
$2.89
D
1.0
M
5.2
Y
1.6
Chicago
% Change
$2.79
D
0.2
M
2.8
Y
3.7
Michcon
% Change
$2.82
D
0.1
M
3.6
Y
3.1
Tr 85
% Change
$2.86
D
0.8
M
4.9
Y
0.2
S. Star
% Change
$2.55
D
1.4
M
5.1
Y
4.6
NOVA/AECO
% Change
$ 1.44
D
0.7
M
8.3
Y
26.2
SF/LA Avg
% Change
$ 3.76
D
5.6
M
12.4
Y
18.7
EP - SJ Blanco
% Change
$ 2.80
D
6.1
M
8.1
Y
2.9
Opal
% Change
$ 2.70
D
1.1
M
4.7
Y
1.5
NGPL MidCont
% Change
$ 2.72
D
0.0
M
1.3
Y
2.3
Source: ICE

Natural Gas Analysis

Key Natural Gas Stats

HH Winter High Future ($/Mcf)
% Change
$3.33
D
2.3
M
4.5
Y
0.0
Liquids Rich Frac Spread ($/Mcf)
$3.36
D
0.9
M
13.9
Y
79.9
Working Gas in Storage (Tcf)
3.16
D
1.0
M
5.2
Y
7.2
Lower 48 Production (Bcf/d)
81.39
D
0.0
M
1.0
Y
1.7
US Consumption (Bcf/d)
62.78
D
0.0
M
3.5
Y
6.0
US Gas Rig Count
180
D
1.1
M
6.2
Y
122.2
ICE Comm. Net Long/Short (Fut & Opt)
1,654,442
D
0.9
M
3.1
Y
16.2
ICE Non-Comm. Net Long/Short (Fut & Opt)
910,856
D
4.5
M
1.4
Y
31.5
Source: ICE; ECRG; EIA; Baker Hughes; CFTC

Commentary

Natural gas is giving back some of yesterday’s spike this morning, selling off back toward $3.00 with a current $0.022 (0.7%) decline vs. yesterday’s settle to $3.018 in current pre-market action. Forecasts continue to run bleak, with the latest National Weather Service outlooks showing high chances of abnormal cold throughout the Eastern US under NWS’ 6-10 and 8-14 day views, although those chances have diminished a bit day-on-day under the 8-14 day. In addition to continuing soft weather dynamics in the forecasts, we also got a hint of what cooler conditions—as well as Harvey impacts—are doing to demand, as EIA reported late yesterday that the US supply/demand imbalance increased from 3.5 to 9.8 Bcf/d for the week ending Wednesday, driven almost entirely by declines in power burn. Henry Hub settled at a 1+ month high yesterday, and rose even higher in the after-market, climbing as high as $3.06. With prices falling back below the 100-day moving average $3.039 which ultimately stemmed Thursday’s advance, we think sustaining $3 will be a challenge, and a slip back toward $2.94 is likely, barring a normalization of weather over the weekend.

The market was very receptive to positive storage news yesterday, resulting in a $0.101 (3.4%) spike for gas to settle at $3.04/MMBtu. Lower 48 natural gas stockpiles climbed by just 30 Bcf, beating estimates for 38 Bs and outright trouncing the seasonally normal 67 Bcf build. The beat essentially put current gas stocks in-line with five-year seasonal norms, suggesting that a new record this fall is likely out of the question. Meanwhile, stocks are now down 7.0% YOY. Meanwhile, NWS projections were abysmal, showing very high chances of abnormal cooling throughout the Eastern US under both the 6-10 and 8-14 day outlooks, but that dynamic was apparently already baked in by bullish Henry investors. Key spot prices were mixed yesterday, and apparently a lot less reactive to the storage beat, which is tracked a lot more closely by traders with Henry positions.

ECRG’s offices will be closed on Monday, September 4th in observance of Labor Day. Regular commentary will resume on Tuesday, September 5th.

Have a great holiday!