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.
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.
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.