Natural Gas Bearish/Neutral | Crude Oil Neutral | Economy Neutral | Weather Neutral |
Weekly Natural Gas Report
The Energy Information Administration (EIA) reported an injection of 78 Bcf into underground storage for the week ending May 5. Inventories are 2,114 Bcf; gas inventories are 18% greater than the five-year average and 31% greater than the same time last year. For the week ending May 2, Baker Hughes reports 157 natural gas rigs in operation, down 4 from the prior week. Crude oil rigs were reported at 588, down 3 for the same period.
Why Buy Now?
Having trouble closing deals due to high rates? We're here to provide you with the information you need to answer the recurring question; Why buy now?
We break down the answer to this question so you can come to the table with all the information you need to help your customer navigate these unprecedented market conditions.
Natural Gas Storage Should be at Record Lows
Remembering all the way back to Economics 101, we know the first items of interest in making sense of any price are supply and demand. How much gas we have stored nationally is one of the most influential factors to the supply side of the equation. With the delay in reopening of a major LNG export terminal and a perfect winter weather scenario, natural gas storage levels have gone from historically low levels to above average levels. Hidden in the numbers is with normal weather and LNG exports, the U.S. would be at record low levels of storage. Since natural gas is used as the primary generation source for power, the risk of future low levels of storage will likely translate to natural gas and power prices continuing with the recent historical high volatility.
Natural Gas Exports are Soaring
With the loss of a major pipeline between Russia and Europe and Asia’s increasing demand, countries around the world are forced to source gas outside their boundaries, and the United States is the top new supplier. This provides U.S. producers with the opportunity to sell LNG gas overseas much higher than domestic prices. In this situation, coupled with low storage levels, domestic natural gas prices would increase significantly.
Natural Gas Power Generation is Booming
Since 2010, the use of natural gas for power generation in the US has skyrocketed due to its affordability, environmental advantages, and the development of shale fracking. Currently, the six-week average demand for power generation has increased by 4 BCF per day compared to last year. This upward trend is expected to continue for many years to come.
In Summary
There is a very real risk that prices could move higher this summer due to stagnant supply and increasing demand. With the market at 12-month lows, right now is a great opportunity to take risk off the table and purchase all or a portion of their energy supply costs.