Friday, October 30, 2015

Saudi Arabia Credit Rating Is Cut By Standard & Poor's -- October 30, 2015


Don also provided the answer to the second of two questions at the end of the original post. Bloomberg Business reported earlier this year, April, 2015
Russia’s foreign-currency credit rating was kept one step below investment grade at Standard & Poor’s as policy makers struggle to boost growth and the financial system risks weakening due to a lack of external funding amid sanctions.
The ratings company also left the “negative” outlook on its BB+ grade unchanged, according to a statement released on Friday. That puts Russia’s rating on par with Bulgaria and Indonesia.
S&P stripped Russia of its investment grade in January for the first time in a decade as plunging oil prices and sanctions over the conflict in Ukraine push the world’s largest energy exporter into its first recession since 2009. The penalties have locked Russian corporate borrowers out of international debt markets, spurred capital flight and weakened the country’s currency, which lost about half of its value last year before rebounding in 2015.
October 31, 2015: a reader answered one of the questions at the end of the original post. S&P downgraded Venezuela's credit rating back in September, 2014:
S&P downgraded Venezuela's rating from B-minus to triple-C-plus. The new rating indicates that there is a one-in-two chance that the South American country defaults on its sovereign debt in the next two years.
Original Post
BloombergBusiness is reporting:
Saudi Arabia’s credit rating was cut by Standard & Poor’s , which said the decline in oil prices will increase the budget deficit in a country that relies on energy exports for 80 percent of its revenue.
S&P cut the sovereign rating one level to A+, the fifth-highest classification, as it said the biggest OPEC producer’s deficit will increase to 16 percent of gross domestic product this year. The nation’s credit outlook is negative as the decline in oil prices makes it difficult to reverse the fiscal deterioration, S&P said in a statement.
“We could lower the ratings within the next two years if Saudi Arabia did not achieve a sizable and sustained reduction in the general government deficit, or its liquid fiscal financial assets fell below 100 percent of GDP,” Trevor Cullinan, a credit analyst at the rating company, said in the statement.
The Saudi Finance Ministry said it "strongly disagrees with S&P’s approach to ratings management in this particular instance." The downgrade was "driven by fluid market factors rather than changes in the fundamentals of the sovereign," which "remain strong," the ministry said in a statement on the website of state-run Saudi Press Agency.
Time to buy Saudi bonds?

I'm curious how S & P rates Venezuela and Russia.

If the S & P cuts the US credit rating, President Obama will sic the IRS on Standard and Poor's.

Week 43: October 25, 2015 -- October 31, 2015

The biggest story this past week: observing a new phenomenon -- non-governmental strategic petroleum reserves and one of the reserves is in North Dakota. CNBC asked the question but did a lousy job reporting on it; initial post here.

It is interesting that there were three stories this week, very coincidental, that Russia, Venezuela, and Saudi Arabia are all burning through their cash reserves. Venezuela has six months; Russia has one year; and, Saudi Arabia, five years.

EOG with permits for 19 wells in one section in Clarks Creek
Bakken Shale ND, new operator in the Bakken; with permits for 8 wells in Lone Butte
BR permitted for re-entry; reason unknown
EOG with permits for 10 more oil wells in Clarks Creek
Target zone efficiency

Minnesotans keystoning the Sandpiper provide Bakken twist 

Bakken economy
Continued discussion on a 4-lane divided highway from Watford City to I-94 (Belfield)

Putting OXY's exit into perspective 
Updates on the Samson Resources, American Eagle bankruptcies 

Global economy
Saudi Arabia burning through their cash 
Venezuela running out of cash; selling their gold 
Russian burning through cash; rainy day funds could be depleted as early as next year 

Bakken Economy -- October 30, 2015


November 8, 2015: must be a slow news day in Dickinson. The Dickinson Press has the story today with the headline suggesting there's a debate about a four-lane highway from Williston to Dickinson.

What amazes me is that the state says it could take as long as a decade to get it completed. I assume the bridge and going through the Badlands would be a bit of a challenge, but ten years? Give me a break. 
Original Post
From The Williston Wire:
The North Dakota Department of Transportation will hold Public Scoping Meetings in November regarding the proposed  project from the Interstate 94 Interchange to the Watford City Bypass (McKenzie County Road 30). The  62-mile project would expand US Highway 85 to four lanes and rehabilitate or replace the historic Long X Bridge over the Little Missouri River.

70 Rigs -- Who Would Have Guessed? -- October 30, 2015; Zavanna Reports Several Nice Wells Southeast Of Williston; Eight (8) New Permits

Active rigs:

Active Rigs70190182185200

Eight (8) new permits --
  • Operators: EOG (4), SM Energy (3), Hess
  • Fields: Clarks Creek (McKenzie); Blue Buttes (McKenzie), Parshall (Mountrail), Ambrose (Divide)
  • Comments: with the relatively mediocre wells SM Energy seems to be reporting in Divide County, it's interesting to see them still drilling; what more can I say about EOG and Clarks Creek: permits for three more wells in section 25-152-95. 250 feet from the north line and between 700 and 900 feet from the west line; for those trying to keep track of this at home, this is the third screenshot of this area in recent weeks. We're looking at the upper lefthand corner in the grey area (Fort Berthold Indian Reservation): permits for the first set of wells (6 wells) is in red; permits for the second set of wells (10 wells) is in green; and, now the permits for the third set of wells in the same immediate area (3 wells) is in black. I haven't taken the time to see which direction these 19 new wells will run. The original four wells were extended long laterals (3 sections) running south. [Again, I may have misread something or have gotten something wrong; if this is important to you, go to the source.]

Producing wells completed (note: these four Zavanna Angus wells are on a 6-well pad):
  • 26682, 2,770, Zavanna, Angus 3-10 1H, Long Creek, the geologist's report says the well is in Stockyard Creek (the well is sited in Long Creek, but runs north into Stockyard Creek); the 4' target zone started 12' below the top of the middle Bakken; gas units maxed at 1,134 units; trip gas hit 3,204 units, t9/15; cum 6K 9/15; producing only 6 days;
  • 26683, 2,950, Zavanna, Angus 34-27 2H, Stockyard Creek, t9/15; cum 13K 9/15; producing only 12 days;
  • 26684, 567, Zavanna, Angus 3-10 3TFH, Long Creek, t9/15; cum 5K 9/15; producing only 8 days;
  • 26686, 548, Zavanna, Angus 34-27 4TFH, Stockyard Creek, t9/15; cum 2K 9/15; producing only 4 days;
QEP reports that the four Jones wells are producing or plugged, in Grail oil field, of course; a six-well pad.

Newfield let six (6) permits expire (it should be noted that it is not unusual for expired permits to "come back" as renewed permits): Sturgeon (3), Schneiderman (3), all in the Tobacco Garden/South Tobacco Garden area. 

I'm Trying To Find The Downside Here -- October 30, 2015

I've noted this before, although I don't know if I have ever posted a note on this. This is way beyond my comfort zone; I know nothing about this -- but that doesn't mean I won't comment on it publicly at risk of looking like a fool (and maybe confirming same). Whatever. Maybe I will just post the "facts" as presented by those who know and then come back to this later. Not.

This is the headline for a story reported by the AP economics writer: US consumer spending records weakest gain in 8 months. The lede:
Consumer spending in September posted the smallest gain in eight months, a sign that shoppers grew cautious at the end of the third quarter.
The Commerce Department said Friday spending rose 0.1 percent, the weakest showing since spending fell in January. Income growth inched up 0.1 percent, which was the smallest amount in four months. Wages and salaries were flat following two months of big gains.
Hold that thought: spending was the weakest showing since January, 2015. Then this, from the linked article:
Much of the September slowdown reflected a fall in energy prices, which resulted in a 1.2 percent drop in spending on nondurable goods such as gasoline. Spending on durable goods, a category that includes autos, jumped 0.8 percent last month. Spending on services rose 0.4 percent.
So, consumers are "cautious"? 
  • spending on durable goods, which includes automobiles jumped 0.8% in one month of cautiousness
  • spending on services rose a respectable 0.4% in one month of cautiousness
  • spending on gasoline dropped a whopping 1.2% (even though demand for gasoline is way up compared to a year ago)
And they did this by saving more:
The saving rate edged up slightly to 4.8 percent of after-tax income in September, compared to 4.7 percent in August.
The article only mentioned one thing that consumers spent less on: energy. Well, duh. Is that bad? Spending less on gasoline in September does not mean Americans are driving less. In fact, they are driving more, much more. Their cars are getting better mileage and Elon Musk is selling a gazillion EVs and yet the amount of gasoline sold in the last reporting period was on an upward trend, and significantly more than the previous reporting period.

Sounds to me like the American consumers are doing just fine. Thank you. Not only that, they enjoy seeing their utility rates increase because they feel good about installing solar energy and wind energy at $3 million / MW. And Starbucks, selling fancy coffee at $4.50 / cup has a record quarter. I assume coffee would be a non-durable, like gasoline.

Notes to the Granddaughters

I'm finally getting around to reading a book I picked up last summer on our cross-country trip from Texas to California via the nuclear museum in Albuquerque, NM: Inventint Los Alamos: The Growth of an Atomic Community, Jon Hunner, c. 2003.

The font and footnotes suggested this was going to be a fairly dry, fairly technical book, but it turns out to be a much better book than first impressions suggest.

I finally know (or think I know, but probably don't "understand," and using the word "know" loosely) the difference between:
  • the "atomic bomb" and the hydrogen bomb 
  • Big Man and Little Man (both atomic bombs)
I've also learned
  • why atomic bombs are easier to "make" than hydrogen bombs; and,
  • that Sheldon Cooper on The Big Bang Theory is the reincarnation of Oppenheimer
I also learned a little bit more about Lise Meitner, perhaps my favorite "character" in this whole history of the atomic bomb. From page 18:
Meitner code-switched a term from biology and called this process fission, a scientific name for the splitting of organisms. In fact, nuclear and atomic, which denoted the center or nucleus of the atom, were also borrowed form biology. Thus, the very names of nuclear physics and atomic science are derived from biology.
The author dwells a lot on "code-switching" in this book.
A person who changes within a sentence from speaking his or her dominant language to another language "code-switches." People code-switch for several reasons: to show off sophistication, to express something their native language cannot precisely communicate. In border regions where people live at the juncture of several cultures, linguistic code-switching is common.
Enola Gay, OMD

Update On Bakken Shale ND -- A New Operator In The Bakken -- October 30, 2015

On February 28, 2015, I asked whether Bakken Shale ND was a new operator in the Bakken? Bakken Shale ND was mentioned in the November, 2015, NDIC hearing dockets:

24642, Basin Shale ND, Lone Butte-Bakken, establish a 2560-acre unit; 8 wells, McKenzie
Specifically, sections 14, 15, 22, and 23 - T147N - R98W. This is what the area looks like today:

There are a lot of vertical wells to the east, but a quick look did not reveal many great wells. Some exceptions:
  • 8543, PA/488, Apache Corp, Bob Creek Federal Unit 4-19-1D (vertical), a Madison well, t3/82; cum 554K 10/90
  • 8623, PA/398, Apache Corp, Bob Creek Federal Unit 3-24-2A (vertical), a Madison well, t8/82; cum 554K 10/91
  • 9551, 463, Vanguard Operating, Foley-Stewart Federal 4-24-3C, t9/82; cum 740K 9/15; 

Putting OXY's Exit From The Bakken Into Perspective -- October 30, 2015

OXY never did "crack the Bakken code." Sounds like whining from The Wall Street Journal:
Occidental said it will net $600 million by selling its Bakken acreage to an undisclosed buyer and will turn its attention to the Permian Basin in West Texas.
“With this $600 million we could run four to five rigs in the Permian for a year and generate more production than we would get out of the Bakken,” said Steve Chazen, the company’s chief executive. “We just don’t see how it competes for capital inside the company in any reasonable price scenario,” he told investors and analysts Wednesday on a conference call to discuss earnings.
So wrong on so many levels. One really has to wonder. Assets worth $3 billion a year ago and they gave them away for $500 million (as reported earlier) but said to be $600 million by the CEO.

Undisclosed buyer? I think the buyer has been disclosed. It is interesting that this is not yet mentioned on the Lime Rock Resources website; makes me wonder? But I digress.

More from the WSJ article:
The Bakken has a reputation in the energy industry of being an expensive place to operate, and it is still plagued by a lack of pipelines to move oil to refineries on the East and West coasts of the U.S.
The break-even costs in the best spots in the Bakken are among the lowest in the world, which we've already gone over several times, and I'm not interested in looking for the links. Again. And the qualifier "best spots in the Bakken" can't be used as an excuse: I would assume that operators are only drilling the "best spots" in whatever play they are in.

Meanwhile, COP had this to say about the Bakken in their earnings call:
In the lower 48 third quarter, [COP/BR] production averaged 551,000 BOE per day.
That's a 1% increase from the same period last year and a 1% decrease sequentially. Importantly, though this represents a 12% increase in our crude oil year-over-year.
We're currently running 13 rigs in the lower 48, six in the Eagle Ford, four in the Permian, four in the Bakken and three in the Permian, one of which is in the unconventionals.
And we're delivering more for less across our programs. In fact, we have seen 20% to 30% lower drilling and completion costs compared to a year ago. About half of that’s driven by program efficiencies and about half is from deflation capture.
Production from these three unconventional plays was 249,000 BOE per day this quarter. That's an increase of 28,000 barrels versus the third quarter last year but a decrease of 6,000 barrels a day sequentially.
249/551 = 45% from unconventional

OXY exits the Bakken and XOM (XTO) is seeking permits for close to another 500 wells (see November's NDIC hearing dockets). Just some of the XTO cases:
  • 24640, XTO, North Fork-Bakken, establish an overlapping 2560-acre unit; 14 wells, McKenzie
  • 24641, XTO, Garden-Bakken, establish an overlapping 1280-acre unit; 6 wells; 3 wells on an existing 640-acre unit, McKenzie (9 wells total)
  • 24658, XTO, Haystack Butte-Bakken, i) ten wells on each of 12 existing 1280-acre units (120 wells); ii) 2 wells each on 16 overlapping 2560-acre units (32 wells); McKenzie, Dunn (120 + 32 = 152 wells)
  • 24659, XTO, Heart Butte-Bakken, 12 wells on each of 19 1280-acre units (228 wells) 
  • 24660, XTO, Lost Bridge-Bakken, i) 12 wells on an existing 640-acre unit; ii) 12 wells on each of 7 1280-acre units (84 wells); iii) 2 wells on each of 9 overlapping 2560-acre units (18 wells), Dunn (12 + 84 + 18 = 114 wells)
(Note: these numbers could be way off; I may be misreading something. If this is important to you, go to the source. 14 + 9 + 152 + 228 + 114 = 517 wells.)

Now That Apple Has Reported, Is Earnings Season Over; If Not Over, Is It Even Relevant / Interesting Any More? October 30, 2015

I don't recall any earnings announcement with live blogging except for Apple, and this wasn't the first time. Whatever.

Today, on tap:

We Have A Glut Of Oil, A Glut Of Natural Gas, And We're Talking About 2MW Of Solar Energy! Can We Stop! -- October 30, 2015

After decades of advocacy and a gazillion dollars in tax giveaways to the solar companies. Kenosha News is reporting:
The future of solar energy in Wisconsin appears bright but could use a little more wattage.
In 2014, Wisconsin installed 2 megawatts of solar electric capacity, an investment price tag of $7 million.
As of the middle of this year, there were more than 171 solar companies at work in Wisconsin, employing 1,900 people.
Despite these pretty big numbers, when it comes to installing and utilizing solar power in Wisconsin, compared to other states, we fall somewhere in the middle of the pack.
According to statistics provided by the Solar Energies Industries Association in a report with GTM Research, the solar capacity installed in 2014 ranks our state 34th nationally and the total cumulative installed solar capacity — 21 megawatts, enough to power 3,100 homes — puts us 30th nationwide.
As Chris Christie would say, "We have - wait a second - we have 19 trillion dollars in debt, we have people out of work, we have ISIS and al Qaeda attacking us, and we're talking about 2 MW of electricity installed in one year in one of our biggest, sunniest states! Can we stop?"

Christie just wants to break free!

Queen, I Want To Break Free

$7 million / 2 MW = $3.5 million / MW. But at least it's free, intermittent, and great for a sun tan.

By the way, for the privilege of 50 people in Wisconsin putting up solar panels on their roofs, all Wisconsin residents will see their monthly utility bills increase significantly:
In the current Wisconsin Public Service case, the utility is asking regulators to increase the monthly residential fixed charge to $25 after implementing an 82 percent increase less than a year ago, from $10.40 to $19. The utility would reduce the variable kilowatt-hour charge.
The new rate design is justified, the utility says, because long-standing tariffs rely too heavily on variable energy charges to recover fixed costs like meters, poles, wires and substations.
A continued emphasis of energy efficiency from state and federal policies, slow customer growth in its service area and increased penetration of rooftop solar are causing energy sales to flatline and eroding its ability to recover those fixed costs, Wisconsin Public Service says. And solar penetration will only continue to accelerate as costs decline.
I've said this before: Americans pay so little for electricity that they are willing to let their monthly utility bills double (perhaps even more) simply to feel good (installing 2 MW of solar power in one year, for example).  When folks are willing to pay $4.50 for a fancy coffee at Starbucks, an extra dollar a day for electricity is hardly worth getting excited about. Same with gasoline. It's so cheap, people no longer feel any urgency to put in the infrastructure to move crude oil and thus we have the keystoning of the Sandpiper in Minnesota.

Update On Egypt's Super-Giant Natural Gas Field -- October 30, 2015


Sunday, November 1, 2015: the giant natural gas field discovered off-shore Egypt may upend Mideast energy diplomacy, but it has already upended the Jewish energy minister: he resigned. His resignation clears the way for Israel to begin developing their own giant oil field found by Noble. This was the strangest story I had read in a long time -- how Obama-like decisions in Israel completed upended (to use that word again) Israelis oil and gas industry and potential financial windfall. AFP is reporting:
Israel's economy minister resigned on Sunday, opening the way for the government to greenlight a multibillion dollar gas deal with US energy giant Noble Energy, a statement from the Prime Minister's office said.
"Minister (Aryeh) Deri announced to me his intention to quit. In order to proceed with the (offshore gas) agreement the ministry will be transferred to me and I will give the greenlight," Prime Minister Benjamin Netanyahu said.
A major deal to exploit offshore gas reserves in the eastern Mediterranean has been stuck for almost a year due to the objection of the country's anti-trust authority, which warned the agreement could give Noble and its Israeli partner Delek an effective monopoly.
Original Post
Previously reported; regular readers were aware of this some time ago. The New York Times points out the political side of the gas discovery in Egypt that threatens to upend Mideast energy diplomacy.
The company, using drilling rights from the Egyptian government, found what it called a “supergiant” natural gas field. It may be the largest discovery yet in the Mediterranean and is one of the world’s biggest new gas finds in years.
Eni will need to drill more wells to prove its claim that the field, which it calls Zohr, holds up to 30 trillion cubic feet of gas. That could be worth about $100 billion, even when taking into account current low energy prices. But the promise of Zohr — the Arabic word for noon — is already brightening the prospects of the Egyptian economy, which has been benighted by an energy shortage and years of political turmoil.
With a big new supply of natural gas, Egypt might be able to stop burning oil to generate electricity and start exporting the petroleum instead. New domestic supplies of natural gas would help conserve scarce foreign currency resources and might spur investment in gas-fired factories and electric power plants. And natural gas exports might follow.
But Egypt’s good fortune could come at the expense of its much richer neighbor. Eni’s trove could threaten Israel’s ambitions to tap its own giant offshore gas field, called Leviathan.
Israel is already self-sufficient in natural gas by dint of a smaller offshore field — Tamar, discovered in 2009 — that serves the country via pipeline. Noble Energy, an American company that operates Tamar for the Israeli government, discovered the bigger Leviathan field in Israeli waters in 2010. Leviathan has potential reserves far exceeding Israel’s own needs.
Encouraged by the Obama administration, Noble reached preliminary deals last year to export gas to both Egypt and Jordan, a move approved by Mr. Netanyahu as a way to earn m oney and strengthen ties with former enemies.
And just a few years ago, "they" said the world was running out of oil and running out of natural gas. 

Not so many "Peak Oil" sites on the web any more, I suppose. I don't know. I haven't checked.

Venezuela Is Running Out Of Money; Begins Selling Its Gold; Clearing Out The In-Box -- October 30, 2015; Cheerio, Cheerios

Why is firewood so darn expensive in New Hampshire? Yup, you guessed it. Blame it on George Bush fracking.  Fosters is reporting:
CONCORD, N.H. (AP) — Northeasterners who are digging deeper into their pockets to pay for firewood this season can add a new scapegoat to the roster of usual market forces: fracking.
Yep, a timber industry representative in New Hampshire said those hydraulic fracturing well sites in Pennsylvania's Marcellus Shale formation to suck natural gas out of the ground are using construction "mats" made of hardwood logs — think of the corduroy roads seen in sepia-toned photographs from the 1800s — to get heavy equipment over mucky ground, wetlands or soft soils.
That increased demand has crept down the chimney into fireplaces. Prices in parts of New England are averaging $325 a cord and can even push past $400 for a seasoned, delivered load. That's anywhere from $50 to $75 more a cord than last year — or an increase of 18 to 23 percent.
Jasen Stock, executive director of the New Hampshire Timberland Owners Association, said it's not just fracking sites that are hogging the logs. Pipelines and transmission wires — really any large-scale construction project — have in the past three years ramped up the appetite for the perfect mat log: a hardwood trunk, 16 to 20 feet long and 8 to 10 inches in diameter.
As a result, the cost of cordwood on the stump (that is, live trees) went from $10 in 2012 in northern New Hampshire to $15 this year, Stock said.
CNN Money is reporting: Venezuela is running out of money fast and has started selling its gold.
The cash-strapped country could default by next year when lots of debt payments are due. Venezuela's reserves, which are mostly made up of gold, have fallen sharply this year as the country needs cash to pay off debt and tries to maintain its social welfare programs.

Venezuela owes about $15.8 billion in debt payments between now and the end of 2016.

But it doesn't have enough to make good on its payments. Venezuela only has $15.2 billion in foreign reserves -- the lowest amount since 2003. A lot of those reserves are in gold.

Less than $1 billion of Venezuela's reserves are in cash, and it has a couple billion in reserves at the IMF.
The Dickinson Press is reporting:
Tesoro Corp. sees continued value in railing North Dakota Bakken crude to its Washington state refinery despite higher costs because of improved yields, CEO Greg Goff told analysts on Thursday. 
IceAgeNow is reporting that the atmospheric CO2 in 1910 equaled that of today. First comment at that link:
We do have historical ice core and recent volcano data series that both track each other and do show an upward trend. Looking at longer historical records going back thousands of years….it is not very conclusive that temperature tracks CO2 levels and it appears temperature change leads CO2 change. If CO2 level is causative, based on historical Vostok ice core samples….we should have seen a MUCH larger spike in temperature already. The data shows as temperature varied by 16F while CO2 varied by 90 ppm or about 5.5 ppm / F. So if CO2 is up another 100 ppm, we’d expect another 18F increase yet none at all is shown in the ice sample data. This is easily explained if historical temperature data is driven by some other external factor or cycle the typically impacts both CO2 and temperature and now man-made CO2 emissions are simply added to the external factor. The external factor has not changed so the temperature has not changed greatly. Some may argue that it is CO2 driven but with a lag so the impact has not yet shown….but the historical data has never shown a significant lag between a sharp CO2 increase and a sharp temperature increase and actually it appears that typically temperature change precedes CO2 change.
SolarCity -- Elon Musk, cousin of the co-founders -- is tanking; falls over 18% on earnings miss.
  • Posted a loss of $2.10 vs an estimate of a loss of $1.90.
Setting us up for $200 oil: COP will exit deepwater exploration.

MarketWatch is reporting that General Mills will cut more jobs, close more plants:
General Mills on Thursday announced another round of job cuts, the latest set of layoffs from the maker of Cheerios as it seeks to improve profitability amid lackluster sales.
The Minneapolis food giant, struggling to adapt to consumers' shifting preference for fresh and natural food options over packaged goods, is in the midst of a multiyear cost-cutting effort. It has announced several plant closures and thousands of job cuts in roughly the past year.

Friday, October 30, 2015 -- Natural Gas Inventory Could Hit All-Time High -- RBN Energy

Active rigs:

Active Rigs69190182185200

RBN Energy: Shadow of Storage Surplus Threatens Winter Natural Gas Prices.
The Energy Information Administration (EIA) yesterday (Thursday) reported the U.S. natural gas storage inventory is 3,877 Bcf as of Oct. 23, 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 (Nov. 2, 2012) by the end of the traditional storage injection season on Oct. 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.