US Natural Gas Weekly Update (4-15-2016)

For the 16th week of 2016 ending 4/15/2016,US natural gas in storage increased by 7 BCF ending the week at 2,484. This build likely ends the winter withdrawal season with last weeks 3BCF draw coming 2 weeks later than 2015’s last draw for the week ending 3/27.

04-15-2016 Image B

The chart above shows us where inventories and price were for the sixteenth week of the year from 2010-2016. We can see a pretty clear correlation between price and ending inventory levels especially going back to 2012. The relationship is what you would expect…the higher the inventory, the lower the price. 2016 storage is currently 856 BCF ahead of where we were this time last year, which explains why natural gas prices have been stuck at or under the $2.00/MCF level for a few months now.

04-15-2016 Image C

If you are a domestic gas producer like CHK, the chart above provides a pretty good history lesson on how things got so bad, and perhaps a small glimmer of hope that has been developing over the last few weeks.  We started the year about 500 BCF over the prior year, but quickly jumped to a 1000 BCF year over year…triggering the price to fall back as low as $1.57/MCF in early March. To put 1,000 BCF in perspective, if domestic production has fallen about 2BCF/D, and consumption has increased 2BCF a day, just burning through a 1000 BCF surplus would take 250 days all else equal… just to get back to where we were a year ago with gas in the $2.50-$3.00/MCF range. That’s definitely a better price than  $1.57, but it could be too little too late for struggling producers like CHK. However, following the blue series in the chart above, we see a sharp turnaround with the 1,000 BCF YOY surplus being cut to 856 in just a few weeks and likely to be cut further in the weeks ahead as strong inventory builds in 2015 weeks 17 and 18 are unlikely to repeat. As I write this, gas prices have already broken through $2.20. Where they go from here will depend primarily on how fast domestic production actually declines and the weather as we close in on summer.

Interactive Excel Dashboard available for download here: Gas_Storage_Report (4-15-2016) (Works best with Excel 2010+)

To use the Dashboard within the excel web app embedded below, click the icon in the bottom right corner for full screen for full screen.

US Petroleum Flows For The Week Ending 4/15/2016

Petroleum Stocks:

20160415_Petroleum_Stocks

For the week ending Friday 4/15/2016 US Petroleum inventories decreased 0.4 million barrels coming down a bit off of last weeks record high 2.059 billion barrels.

Prices averaged $41.23 for the week, up 12% over last week’s average of $36.72.

Trailing 52 Week Average Inflows/Outflows:

20160415_Trailing52W_FLOWS

We continue to see the gap between inflows slowly shrink as consumption slowly increases and production slowly increases. The current daily gap between inflows and outflows using the trailing 52 week averages is 363 thousand barrels a day. If production continues to decline at about 20 thousand barrels a day (each week) and consumption increases at 20 thousand barrels a day (each week), all else equal we could see convergence by the end of June.

Production:

20160415_Production

Domestic production fell 24 thousand bbls/d vs the prior week continuing a short term trend going back to January and a longer trend that goes back to the middle of last year.

 

Weekly Inflows:

20160415_WEEKLY_INFLOWS

Weekly Inflows totaled 141 Million BBLS vs 147 Million BBLS in the prior week in the “processing gains/other” category. For the year through 15 weeks, Imports are up 61M bbls over 2015. “Renewables”, primarily ethanol, looks to be trending down in what could be a seasonal shift.

Weekly Outflows:

20160415_Weekly_Outflows

Weekly Outflows were up about 1.7 million barrels for the week with a big jump in distillates and propane offsetting declines in gasoline and jet fuel. Although it’s just one week, the increase 423 thousand barrels per day increase in distillate provides a break in a curious downward trend.

20160415_Distillate

On the other hand, the 52 week trend for gasoline continues to head upward, dragging the entire consumption curve with it.

20160415_Gasoline

Summary:

For just the 4th time through 16 weeks of 2016 we see a draw in total petroleum inventories. It will take more than one week to break the oversupply that started at least 18 months ago, but string 4 of these together and I could see a solid enough foundation to push oil back into the $50 ballpark. However, a few more 7 million bbl builds like we saw just last week could send us crashing back through $40. At the end of the day, crude in the low $40’s feel about right for me. Production is declining and consumption is creeping up just like everyone seems to think. If pressed, I would guess the bulls are being a little bit optimistic about Doha and the underlying decline rates, but stay tuned..what do I know 🙂

Excel dashboard used to generate the charts is embedded below using the excel web app. You will probably want to click in the icon in the bottom right to launch full screen, then adjust your browser zoom to fit your screen (Shortcut is CTRL+MouseScroll). Or…download it using this link: EIA_PETROLEUM_MASTER_FILE . Instructional video on YouTube HERE

 

 

Data Right Where It Belongs…In Excel!!