Supply - Positive
Tighter supply in the days running up to November 15 should show up in lower stocks on the pending report tomorrow. Supply dynamics are likely to be a mild positive driver for gas prices through this week on the potential for announced freeze offs or delayed LNG import deliveries. Last Friday's Baker Hughes Rig Count report showed gas-directed rigs in the U.S. sank by just 1 so that should not be a material positive or negative datapoint.
Weather - Positive
Heating demand is likely to be a strong positive for not only last week's data to be reported tomorrow, but also the data through the end of this week which will be reported next Thursday, 11/29. Spot Henry Hub prices have breached $4.80/MMBtu in the last several days as temperatures and snows fall. Prices have settled back to $4.65 today, but nonetheless appear to be pushing northward as temperatures fall. We therefore see this surprisingly early and severe winter Weather as being a positive driver for gas prices this week.
Trader Sentiment – Negative
We would think the commodity price momentum has largely taken much of its course already for this early in the season and after several weeks of net long gains being reported in CFTC futures data. Intraday prices as of press time today are at $4.65/MMBtu. Despite positive overall fundamentals, we expect traders will likely take a less aggressive stance on future price run ups at least until December weather shows up. Already, the current period is the longest run of supra-$3/MMBtu gas prices since 2014 which was the year of the polar vortex and when working gas storage levels fell below the 824 BCF working gas level at the end of the '13/'14heating season. Then, Henry Hub was trading at a $4.47/MMBtu price which is below today's $4.65 intraday prices. We therefore see Trader Sentiment as being a negative driver for gas prices this week.
Storage - Positive
We estimate a storage withdraw of 118 Bcf will be reported by the EIA this week for the week ended November 15. As we stated last week, this week will begin the first of several consecutive net withdrawals through the winter season. If it comes in at our anticipated level, it would be more severe than the average 102 BCF weekly withdrawal that would take storage down to just 1 TCF by the end next 22 weeks within the heating season that will end on March 31, 2019. That is to say, if winter worsens and drives equal or higher withdrawals through the winter, working gas stockpiles will fall well below 1 TCF and that could cause late season price spikes and deliverability problems for the tail end of the heating season. It would also create a hole which may be hard to refill before the winter of 2019/2020 given higher LNG exports, higher industrial and power demand at pending plants going into service, and more. All in, we see Storage changes as being a positive driver for gas prices this week.
Demand - Positive
We see a net positive effect for structural demand side drivers this week. While the seasonal demand side is captured in our discussion on the Weather driver above, we see the greater power plant base added in 2018 year to date along with new energy-intensive industrial facilities (petrochemical plants starting up and existing refined product demand which hit an all time record last week for this time of the year, will be supportive of higher industrial and power sector demand. We therefore see Demand as being a positive driver for gas prices this week.
Flows - Neutral
The pressure and flow restriction on the import pipeline in British Columbia has already been known and is likely fully priced in, and short of any 'new' news for the preceding or anticipated days to week's end, we see Flows being a neutral driver for gas prices this week.