Into The Vortex – EIA Reports Working Natural Gas in Storage Increased 15 Bcf

Natural gas prices have risen over $7 Btu in the benchmark Henry Hub contract, prices not seen since November 2008. The premium of futures for June over May rose to a record high for a third day in a row. A tightening backdrop in the natural gas market, unrelenting export demand highlighted by Germany’s dependance on Russian supplies and its impact on domestic supplies futures continue to be elevated. Last week EIA reported a lower-than-expected build of 15 Bcf of working gas in storage, though a pull is expected this week. With the global energy crisis LNG exports continue to grow but we balance supply shortages with deliverability.

Into The Vortex Contents

Click on the links below to navigate to the relevant section.

  1. EIA Natural Gas Storage Forecast and Analysis
  2. Natural Gas Quick Summary
  3. Rig Watch
  4. Weather
  5. LNG and Export Watch
  6. Natural Gas Import Watch
  7. Natural Gas Demand Watch
  8. Nuke Watch
  9. Natural Gas Futures Technical Analysis
  10. Option Volatility and Gamma
  11. DCOT Report

EIA Weekly Storage Report

  • Report Date:4/7/2022 Via TradersCommunity.com
  • Release Time: Thursday 4/14/2022 10:30 a.m. ET
  • Market Expectations
  • Actual +15 Bcf Prior -33 Bcf
  • Consensus Forecast Actual+18 Bcf
  • Cons. Range +14 Bcf to +22 Bcf
  • Last Year: +55 Bcf
  • 5 Year Average: +33 Bcf

With “healthy corrections’ not withstanding we have seen mostly steady gains in the natural gas market since Russia’s invasion of Ukraine one month ago. Benchmark Henry Hub prices are well above the $6.000/MMBtu mark for April, traditionally a month in which prices sell off as temperatures warm. In addition to the Ukraine factor weather also has been supportive of prices as models continue to reflect periods of brisk temperatures that could keep demand elevated longer into the spring season.

US Natural Gas Storage Stage

Summary

Working gas in storage was 1,397 Bcf as of Friday, April 8, 2022, according to EIA estimates. This represents a net increase of 15 Bcf from the previous week. Stocks were 439 Bcf less than last year at this time and 303 Bcf below the five-year average of 1,700 Bcf. At 1,397 Bcf, total working gas is within the five-year historical range.

Last Week’s Report -33 Bcf #TCNG

Despite the early injection, recent bouts of chilly temperatures in the Midwest and Northeast are expected to result in at least one more storage withdrawal. Early estimates for the next EIA report point to a pull of around 25-35 Bcf.

NatGasWeather said after the next two EIA reports account for chilly weather systems the past 10 days, the deficit to the five-year average could swing back to around 300 Bcf. “A comfortable U.S. pattern April 5-15 should then improve deficits slightly, although not enough to prevent the background state from remaining relatively tight and bullish.”

Broken down by region

  • South Central region +28 Bcf increase +13 Bcf in nonsalt facilities and +15 Bcf in salts
  • Midwest -3 Bcf decrease
  • East -12 Bcf decrease
  • Mountain -1 Bcf increase
  • Pacific +4 Bcf increase

Current Storage Level vs. Last Year; 5-Yr

  • Current Storage Level: 1397 Bcf
  • Storage 2020/Same Week:  1,836 Bcf
  • 5Yr Avg/Same Week: 1,700 Bcf
EIA Storage Report
us natgasl locations

via Brynne Kelly @BrynneKKelly


Global Natural Gas Quick Overview


Image

Via Ole S Hansen @Ole_S_Hansen

Image

Natural Gas Market Price Influence Factors

Bearish Factors Include

  • Economic damage and reduced natural gas demand caused by the Covid pandemic,
  • Warm U.S. winter that resulted in weak demand for natural gas for heating.
  • Over long spec positions
  • Expectations that the high level of oil prices would increase shale drilling and natural gas extraction as a by-product

Bullish Factors Include

  • Record foreign demand for U.S. nat-gas as flows to U.S LNG export terminals on April 18 rose to a record 11.921 bcf (data from 2014) and after U.S. LNG exporters loaded a record 81 cargoes in November, breaking the previous record of 75 set January of 2020,
  • Expectations that the low level of oil prices will reduce shale drilling and natural gas extraction as a by-product
  • Tighter U.S. nat-gas supplies that are down -14.8% y/y and -2.6% below their 5-year average.
  • High power burns
  • Perception that gas supply and demand are more inelastic than ever before.
  • Over short spec positions

Rig Watch 

Baker Hughes active rigs total in the U.S. onshore and Gulf of Mexico (GOM)

  • US Baker Hughes Rig Count 15-Apr: 693 (est 696; prev 689)
  • – Rotary Gas Rigs: 143 (est 143; prev 141)
  • – Rotary Oil Rigs: 548 (est 550; prev 546)

US Oil Rigs w/w changes by key shale basins

  • Permian +2 to 333
  • Eagle Ford +3 to 51
  • Williston unchanged at 33
  • Cana Woodford +1 to 26
  • DJ Niobrara unchanged at 15

Canada Rigs

  • Canada averaged 128 active drilling rigs this week according to data from the Canadian Association of Energy Contractors. Of those rigs, 35% are drilling for natural gas, 56% are drilling for oil, 3% for other (helium, hydrogen, geothermal, or potash), and 6% are moving.
  • Drilling activity by province is 88% in Alberta, 2% in Saskatchewan, 4% in BC, and 6% elsewhere.
  • Precision Drilling holds the majority of the Canadian market share with 36%, Ensign Drilling with 23%, Savanna Drilling with 10%, Horizon Drilling with 7%, Akita Drilling with 6%, and Bonanza Drilling with 5%. View a full breakdown of Western Canada’s rig activity via Camtrader

“Rig activity…would need to increase by about 36 weekly through year-end to reach a sustainable plateau to hold current oil volumes in 2022.” –Mizuho via Reuters 12/17/21

Comments by executives of multi-basin super independent EOG Resources Inc. mirrored those for many Lower 48 management teams.

“We’re not going to grow until the market clearly needs the barrels,” EOG President Ezra Yacob told analysts during a call Thursday. “We’re committed to staying disciplined. Currently, we want to see demand return to pre-Covid levels.”


Talking About The Weather

Gulf of Mexico

Gulf of Mexico Live Weather Report

European Energy Crisis

The energy crisis pounding the world with unheard of prices was impacting the domestic pricing. In Europe we are seeing up near record highs again. U.S. fundamentals only have the domestic gas market in bear territory with mild weather and low demand.

The EU also is considering requiring natural gas storage facilities to be filled at least 80% capacity for next winter. Given that European supplies are below historic averages coming out of winter, this would almost certainly keep demand for U.S. LNG elevated through 2022.

Europe’s dependence on Russia’s gas in one map via @michaeltanchum

Back to the panic levels of October.

  • Dutch TTF natural gas closes at €105.77 per MWh (**3rd highest ever settlement**).
  • UK NBP closes at 268.80p per therm (3rd highest too).
  • European gas inventories have fallen to a level typical of mid-January
Image

In the EU markets the energy crisis is deepening with prices soaring with an unplanned outage cutting supplies from the giant Troll field in Norway. Coming on top of geopolitical worries, freezing cold weather and dwindling stocks. Emissions trades up to compensate for higher coal demand

Image

La Nina

Image

 

U.S. Climate Prediction Center said Thursday there is a 53% chance that La Nina conditions could persist through the summer and a 45% chance of those conditions carrying into next fall.  

This raises the likelihood of Atlantic hurricanes, which could disrupt natural gas operations on the Gulf Coast late in the summer and early fall. La Nina conditions tend to allow more tropical systems to strengthen into hurricanes, the forecaster said. 

The phenomenon begins when the atmosphere reacts to a cooler patch of water over the Pacific Ocean.

Paths of Recent Gulf Hurricanes

Image

Technical Analysis via KnovaWave 

Henry Hub Natural Gas Futures Weekly Chart Outlook via @KnovaWave

Daily: US Natural Gas has continued higher after it completed 3 waves correcting the daily 8/8 spit correction to -2/8. Two clear alternatives, we are correcting the highs 5 or that was a 3 and we go higher. We closed over the 2 most recent highs and +1/8 right. Support is Tenkan, Kijun below.

The Cloud top broke Kijun and Tenkan with a kiss of life. Meaning that 3 was either an a i or iv– impulse in a nutshell. Prior to this move the adjunct failure of the 50dma and Tenkan opened up the retest of 3.80-3.60 last time which fueled this week’s move higher. From there we fell sharply to the Kijun, A completion of 4 (bear) or (i) of 5 (bull) which gave this move sustenance

Notice the fractals of the move after completing the C of 4 bullish scenario played out the consolidation phase since it completed its IV (Bull Case) last year since then a series of 3 waves. For the bulls all this needs to hold for the highs to be a (iii) looking at possibilities we have the 161.8% at 7.026 if we get ‘silly’ 50dma support.

Like the larger wave on the way up it accelerated through previous highs (flat topped triangle energy) and over the resistance at 8/8 and new highs. We successfully tested that break in a pennant ABC. Previous highs (flat topped triangle energy) and 8/8 and new highs underscore the structure that fed the move and is key longer term. 

Weekly:  Notably no sharp reversal, like the previous impulsive spikes. We saw a clean break of the Kijun to close back over near highs. This move was fueled by a fractal of the classic double top playing out after a spit of the weekly Kijun was sent back off Tenkan only to reverse all the way to spit the 50wma for the energy needed. Resistance is Previous highs and Murrey Grid.

The Natural gas rebalanced after continued to fail and retrace with impulse after reaching its major target, the double top potential from 2014 which equated nicely to over 8/8 Weekly and showed true impulse off that to rebalance Chikou. It’s now a question of degree, 3 or 5? Impulse just shy of the 8/8 and Tenkan confluence. A question of continuation with the 50wma as resistance and cloud as support.

Natural gas futures Weekly

  Natural Gas Production

Image
Image

The EIA’s latest 914 report showed dry gas production slumping 2.59 Bcf/d month/month as every key state saw output slide in the coldest January since 2014. The Appalachian tri-state area saw production fall 1.03 Bcf/d from December, while Texas and New Mexico output slid a combined 0.81 Bcf/d.

Around 97% of production over the next two years will come from the Lower 48 states (L48), excluding the Federal Offshore Gulf of Mexico (GOM). The other 3% will come from Alaska and the GOM.

U.S. natural gas production growth will primarily come from the Appalachia region in the Northeast, the Permian region in western Texas and southeastern New Mexico, and the Haynesville region in Texas and Louisiana. EIA forecast that the Permian region will contribute 2.2 Bcf/d to production growth in 2022 and 1.2 Bcf/d in 2023.

EIA

Natural Gas Exports Watch

Some US LNG export projects vying for FID:

  • > Corpus Christi Stage 3 — 10mtpa (mostly contracted)
  • > Plaquemines — 10mtpa (mostly contracted)
  • > Driftwood — 11mtpa (mostly contracted)
  • > Cameron T4 — 6mtpa
  • > Freeport T4 — 8.4mtpa
  • > Commonwealth — 8.4mtpa
  • > Rio Grande — 11mtpa
  • via Stephen Stapczynski @SStapczynski

On Friday March 25, 2022, from a EU/NATO meeting in Poland , the Biden administration and European Union (EU) leaders announced a new effort to ensure Western supplies of natural gas to the continent through 2022 and beyond. The United States and the EU now have a joint goal to send an additional 15 billion cubic meters of LNG to EU countries in 2022, about 1.5 Bcf/d, with “expected increases going forward,” according to the White House.

U.S. exporters have little room to ramp up more in the near term, and Western governments do not have the power to order private companies in the LNG market to direct shipments to Europe.

Image

LNG

Natural Gas feed to LNG facilities Sabine Pass, Cameron, Elba Island, Cove Point & Corpus Christi

Image
Image
US Gulk Coast LNG Netbacks

  ++Charts via RonH @RonH999 – Visit Ron for daily updates 

Natural Gas Mexican Exports Watch

via RonH Energy

US natural gas exports to Mexico established a new monthly record in June 2021 surpassing 7 Bcf/d from then March-to-date average exports to Mexico continued to be flat against the previous month, at barely 5.6 Bcf/d, according to Wood Mackenzie. In the preceding five years, the average February-to-March growth rate was slightly above 4%.

Image
Mexico pipeline exports

 

Image

Natural Gas Canada Import Watch

Source via RonH Energy

Image
Canadian imports

Natural Gas Demand Watch

Image
Image

via RonH Data ‏@ronh999

Natural Gas Nuclear Power Watch

Source: via RonH Data ‏@ronh999

ALERT Three Mile Island nuclear shut down permanently on Friday afternoon 9/292019.

Image

Natural Gas Options Structure – Volatility (COT)

NYMEX ON NATURAL GAS OPTIONS CommodityVol.com @CommodityImpVol

NYMEX ON = NATURAL GAS OPTIONS (Live Link)

Image

Natural Gas Futures Commitment of Traders

 Disaggregated Commitment of Traders (DCOT) via RonH Data ‏@ronh999 @ole_s_hansen

Latest ICE and CFTC Open Interest Data: 

Image

Natural Gas DCOT futures only managed money traders WoW change

(Note at NG peak Highest Longs Ever 87% (since 2006) Lowest Longs 2020 24%)

  • For week ending Mar 29
  • Natural Gas DCOT futures only managed money traders 
  • WoW change
  • +2,918 longs,
  • -3,632 shorts,
  • +6,550 net change,
  • 50.1% net long
Image
Image
Image

Understanding DCOT Reports 

Read Understanding Commitments of Traders Reports – COT, TFF and DCOT to help understand the disaggregated reports (DCOT) and how they break down the reportable open interest positions into four classifications:

1. Producer/Merchant/Processor/User 2. Swap Dealers 3. Managed Money 4. Other Reportables 

Sources: TradersCommunity, EIA, RonH Energy, The Fundamental Edge, KnovaWave

From The TradersCommunity US Research Desk