General comment re: Storage
It would be downright foolish to ignore the NG storage withdrawal today of -198Bcf. For me it comes at a total surprise, nor did I think it would come anywhere close to that figure. Thing is, everyone is fixated on last year’s storage compared to this year. Percentage wise it is running 47% more than the same week last year. But it’s totally irrelevant, -as last year’s severe winter was a complete “one-off” and storage was super, super low. The real figure to keep your eye on here is this year’s storage as it relates to the 5 year avge, and that ladies and gentlemen, is trailing the 5 year avge by -13%. So on balance, storage withdrawals this year have shadowed the 5 year avge with a small deficit.
Today’s storage report must be considered in lock step with the rig count. On the gas directed side, the rig count has been successfully managed lower by the industry for over 2 years. At one time it had hit the dizzying height of 936 rigs but it has actually been under 400 rigs since Mar 29th 2013. In fact, since Nov. 7th 2014 (356 rigs) it has plummeted to a mere 268!!!!.
Daily production in the lower 48 is running about 6Bcf/d over last year but there is plenty of room in storage. The storage figures support that comment. As the oil directed rigs are pulled out of production we will see less and less associated NG production. My contention is that NG prices will perk up before the price of WTI. Reason? WTI inventories are super high and that becomes a lingering problem for WTI recovery and in that scenario the rig count will continue to be ruthlessly culled and……. that is good for NG!!!!!
A number of coal plants have been retired recently which will probably take about a ½ Bcf/d of that 6Bcf/d overage. Yes, storage will "fill" faster, but it will be offset by the considerably less associated nat-gas due to the declining rig count. Oh, and by the way, did you know that North America gets its first LNG plant operating in the 4th quarter of this year? Yes, Sabine Pass in Louisiana will be up and running with a projected demand of approx. 6Bcf/d and a full order book of customers waiting for that gas.