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Our view of Bloomberg scrapes shows field production increasing marginally by 0.44 Bcf/d or 3.05 Bcf over the report week ended Nov 22. Demand decreased in all major categories by 10.91 Bcf/d or 76 Bcf. Canadian imports fell by 0.80 Bcf/d while Mexico exports fell by 0.15 Bcf/d.
Our analysis leads us to expect an 23 Bcf withdrawal level for this coming report week. Our expectation is 4 Bcf less than the current consensus of 27 Bcf and much lower than the 50 Bcf five-year average storage withdrawal.
Key Hub Price Call:
Henry Hub prices are falling towards the $2.50 range on forecasts of a mild winter ahead. This is in line with our expectation based on NOAA forecasts. The upcoming Thanksgiving weekend is bound to reduce the industrial and commercial demand thereby keeping Henry Hub prices at or below $2.50/MMBtu.
Gas Price Differentials:
We expect the Eastern differentials (Leidy, New York Hub, Chicago Citygate) to trend downward based on weather patterns. The western and central regions are expected to maintain their prices with respect to Henry Hub.
Storage - Positive
We estimate a storage withdrawal of 23 Bcf will be reported by the EIA for the week ended Nov 22, 2019. That’s far below the five-year average 50 Bcf draw. The cold front of the prior week gave way to warmer than normal temperatures for this report week, resulting in much less demand. All in, we see the storage changes as a positive driver for gas prices this week.
Weather - Negative
NOAA 8-14 day forecasts point toward mild to moderate weather throughout the Lower 48. Temperatures will be in the 40s and 50s from the Great Lakes to the Northeast and in the 60s and 70s from Texas to Mid-Atlantic Coast. Overall, we expect light demand throughout the week. Accordingly, weather is a negative effect on gas price activity.
Supply – Negative
Average field supply is showing a w-o-w increase of more than 0.44 Bcf/d or 3 Bcf, but falling seasonal Canadian imports reduced 0.80 Bcf/d or 5.62 Bcf of supply into the market. Overall, we see supply as being a weak negative this week.
Demand – Negative
Demand fell in all major categories with a more than 7.90 Bcf/d drop in residential and commercial demand. Power generation and industrial sector demand also declined by 1.94 Bcf/d and 1.07 Bcf/d, respectively. We expect the demand to stay at or around these levels for rest of the week. Demand is a negative effect on this week’s prices.
Flows – Neutral
We see flows as a neutral driver this week. There were no freeze-offs and no new upset conditions for the week ended Nov 22.
Trader Sentiment – Negative
Warming weather trends in the short term are keeping market prices low. We see trader sentiment as negative this week. The CFTC's 11/22/2019 commitment of traders report for NYMEX natural gas futures and options showed that reportable financial positions (managed money and other) on 11/19/2019 were 141,589 net short while reportable commercial operator positions came in with a 105,234 net long position. Total open interest was reported for this week at 1,218,197 and was up 24,149 lots from last week's reported 1,194,048 level. Sequentially, commercial operators this reporting week were adding to longs by 4,209 while cutting shorts by 13,466. Financial speculators added shorts and added longs for the week (23,615 vs 3,029, respectively).