RBN Energy: Storage Surplus Threatens Winter Natural Gas Prices Part 2.
Last Thursday, November 5, 2015, the Energy Information Administration reported the U.S. natural gas storage inventory is 3,877 Bcf as of October 23, 2015, which is above the 5-year maximum for this week and within striking distance of breaching the all-time record high of 3,929 Bcf (November 2, 2012) by the end of the traditional storage injection season on October 31.
And, while the production growth rate has slowed compared to recent years, and even dipped a bit over the past couple of weeks, total gas production is still near record levels and about 2.0 Bcf/d higher than last year.
Now the gas market is about to flip to withdrawal season, when winter heating demand typically exceeds available local production, leading to storage drawdowns. The combination of high storage and production levels sets up a bearish dynamic for the winter market. Today, we take a look at the supply and demand balance going into the winter gas market.
Our last update on the natural gas supply and demand balance was at the end of August 2015. At that time the market had worked off some of the supply surplus it started with back in April. At the start of the summer injection season in April there was 600 Bcf more gas in storage and production was 4.0 Bcf/d higher than last year. By August end, near-record demand from power generators and flattening production helped to whittle down the year-over-year storage overhang to just under 500 Bcf. Since then, demand has maintained record highs each month. And, while average production set a new record in September, year-over-year increases continued to flatten out.Increasing sand being ordered? I generally don't pay attention to this site, for various reasons, but I happened to check in on "Emergent Group" this morning, and their lead story:
The Q3 investors reports are coming in with U.S. Silica and Hi-Crush reporting volume increases, at 32% and 14% respectively, compared to Q1. We expect more and more proppant and sand companies to begin working closely with E&P's to reduce costs and gain efficiencies. Other companies, such as Unimin are showing record breaking deliveries to Eagle Ford and Marcellus.