Key Points: Bloomberg scrapes show us that gas field production was higher by 0.29 Bcf/d or 2.0 Bcf for the week. Demand increased moderately by 2.6 Bcf/d w-o-w and was commensurate by the increase in exports from Canada by 0.25 Bcf/d and decrease in imports to Mexico by 0.15 Bcf/d. Natural gas fundamentals appeared stable and overall effect on supply demand equilibrium was minimal.
Our analysis leads us to expect the EIA to report later this week that there was a 46 Bcf withdrawal for the week ended Mar 22. It is a bit higher than the 42 Bcf five year average withdraw and in comparison to the current 42 Bcf consensus whisper expectation)
Storage – Neutral
We estimate a storage withdrawal of 46 Bcf will be reported by the EIA this week for the week ended Mar 22. With only one week remaining for the end of the classic withdrawal season ending Mar 31, the withdrawal values are tapering down as winter transitions to spring. In our prior forecast, we estimated a 48 Bcf gas withdrawal for the week ended Mar 15 versus an actual reported value of 47 Bcf. Our 46 Bcf withdrawal expectation for this week is almost 20% higher than the 42 Bcf five year average withdrawal for the same week. Overall, we believe that storage changes will offer a neutral driver for gas prices this week.
Weather – Negative
The NOAA weather service forecasts through Mar 31 shows a warming trend through much of United States. Parts of Southeast, Great Plains and the West Coast are seeing lesser-than-normal conditions through the next 6-10 days however, we do not expect the heating demand to increase materially. All in, we see weather as a negative driver for gas prices.
Supply – Negative
Average field supply increased marginally to 84.69 Bcf/d for the report week in the absence of freezeoffs and upset conditions. We expect supply to be exerting a negative pressure to prices this week.
Demand – Negative
Winter heating demand is expected to fall as entire nation is getting ready for spring and summer. The average demand from major categories for the first three days of the current week shows a high decline of almost 10 Bcf/d when compared to the same period of the prior week. If this trend was to continue, we expect the storage changes to dip into the 30-40 Bcf range for the current week. Part of this demand reduction is also due to the refinery and petchem demand curtailments due to the storage terminal fire incident, which has caused Houston Ship Channel to shut down and has affected operations. Demand appears to be negative for this week.
Flows – Neutral
El Paso natural gas pipeline is not expected to be in operation until April so gas continues to be stranded in Permian. Waha prices have taken a nosedive and have settled below $0.30/MMBtu while April futures is trading at zero! The effect on Henry Hub seems to be neutral in any case.
Trader Sentiment – Neutral
We see Henry Hub is trading around the $2.80/MMBtu currently and for April futures as well. The CFTC's 3/22/2019 commitment of traders report for NYMEX natural gas futures and options showed that reportable financial positions (Managed Money and Other) on 3/19/2019 were 27,972 net short while reportable commercial operator positions came in with a 10,290 net short position as well. We see trader sentiment as being neutral.