US Nat Gas storage - foreshadowing of deficit marketsPNE's president, Phil Hodge, recently wrote that the natural gas storage levels are the indicators of the structural supply demand dynamics of the natural gas market.
Currently gas storage remains in deficit in all 4 key markets Canada, US, Europe and Asia.
Natural Gas Intelligence Reports (which will drive Chicken Little crazy):
- The U.S. storage deficit is 6.7% below the five-year average after a 55 Bcf injection for the week ended July 9. Even Canadian storage inventories are below the five-year average because of heat waves in the West. Both Asian and European inventories are also low, keeping the global market tight.
- European prices erased the week’s losses Friday as fundamentals continue to provide upside. Japan-Korea Marker (JKM) prices were flat on the week, but buying is likely to stay strong as hotter weather pushes up power consumption in South China. JKM spot prices for late August were assessed at over $13/MMBtu Friday.
- “With TTF losing the battle against JKM to compete for LNG cargoes, it does not look as if Europe will be getting any further relief from spot LNG supply,” Wood Mackenzie analysts said Friday of low storage inventories on the continent. “Profit margins to Asia have now widened to an average of 83 cents/MMBtu for the balance of summer after closing to nearly flat two weeks ago. European LNG sendouts dropped again this week.”
And an interesting quote from Goehring & Rozencwajg Associates (New York) reports:
The IEA Ushers in the Coming Oil Crisis... “Tightness in the US natural gas market is beginning to manifest itself in low inventory levels. After having started the year at a 200 bcf surplus to the five-year seasonal average, US inventories now stand at nearly a 200 bcf deficit. Given the current trajectory, our models suggest we could end the injection season at 3.2 tcf of gas representing a 400 bcf deficit, or 700 bn cubic feet lower than the same time last year. If we are correct, inventories run the risk of starting the withdrawal season at the second lowest level in fifteen years. At that point, any bout of cold weather this coming winter would likely lead to a price spike”
“The main challenge faced by US natural gas has been the unrelenting growth of the Marcellus and Permian. If we are correct and both plays are entering the early stages of exhaustion, then a new gas bull market has likely started. Production data seems to suggest we are correct and now anecdotal evidence among the producers points that way as well.”
Supply & Demand Dynamics = storage level changes.
Loving it...... all summer long!!!