Key Points: Average field production increased by over 1.3 Bcf/d or nearly 10 Bcf this week according to Bloomberg scrapes. We see a sharp decrease in demand across major categories by about 7.4 Bcf/d. Canadian imports fell by 0.4 Bcf/d and Mexico exports rose by 0.1 Bcf/d for the report week.
Our analysis lead us to expect a 10 Bcf storage build to be reported by EIA this Thursday which will be the last report for the withdrawal season ending Mar 31. This is in contrast to the 34 Bcf withdrawal that was the five year average withdraw. The current consensus whisper expectation tells that analysts have a mixed opinion with few values in withdrawal and few values in build.
The EIA reported a 36 Bcf withdrawal last week with inventory levels ending at 1107 Bcf. We expect winter March exit that will be reported this week is likely to be above 1100 Bcf as well. There appears to be no effect on Henry Hub natural gas prices with levels staying stable.
Storage - Negative
We estimate a storage build of 10 Bcf will be reported by EIA for the report week ended Mar 29. There could be a storage build or a withdrawal for this week as the consensus whisper expectation has values on both sides of zero. We expect a mild storage build for the Lower 48 overall, however this could vary from region to region.
Weather – Neutral
The updated NOAA weather 6-10 day forecasts show that a warming trend is the on the way. Weather forecasts are cooler than normal for the week of April 10th-15th however, demand would still be light. Except the Pacific Northwest, temperatures are rising in large portions of Lower 48. We see weather as neutral this week.
Supply – Negative
Production is on the upward trend for the past three weeks and Stratas Advisors expects the trend to continue well into spring and summer. The average weekly production reached 86 Bcf/d for the report week. The power plants and industrial units starting in the injection season would benefit from the increase in production. All in, we see supply is exerting a negative price on prices.
Demand – Negative
We expect demand to be light going forward. This year’s winter has seen highs and lows in demand because of the erratic low temperatures in November and February, considerably early and late in the season. The highest withdrawal recorded during this winter was 237 Bcf during the week of 4th Feb. The lowest value is possibly from the report week that is a storage build of 10 Bcf. Accordingly, we see demand as being negative for prices this week.
Flows – Neutral
Throughout the winter, natural gas supply has been disrupted in the Pacific Northwest due to the breakdown of the Enbridge BC pipeline. Sumas prices reached all time high of $161 in March and have since fallen to less than $4/MMBtu. It is likely that alternate sources of gas have been established from storage facilities and rocky mountain pipelines that help to combat the disruption. However, there has been no effect on Henry Hub prices and flows are expected to be a neutral driver this week.
Trader Sentiment – Negative
We see natural gas futures prices are falling despite forecasts of returning cold. We see trader sentiment as negative. The CFTC's 3/29/2019 commitment of traders report for NYMEX natural gas futures and options showed that reportable financial positions (Managed Money and Other) on 3/26/2019 were 24,045 net short while reportable commercial operator positions came in with a 14,396 net short position as well. The net long decline this week which follows a net long gain last week shows operators clearly seem to be less optimistic this week, while financial speculators appear to be more bullish given a net long gain this week after a net long decline last week.