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Natural Gas Market: Our EOS Storage Indices Are Below Market Expectations

Natural Gas Market: Our EOS Storage Indices Are Below Market Expectations

This report covers the week ending October 9, 2020.

Total Supply-Demand Overview

We estimate that the aggregate demand for U.S. natural gas (consumption + exports) totaled around 607 bcf (or 86.7 bcf/d) for the week ending October 9 (+1.9 bcf/d w-o-w (week over week) and +1.6 bcf/d y-o-y (year over year)). The deviation from the norm remained positive and actually increased from +8.9 bcf/d to +13.0 bcf/d.

We estimate that the aggregate supply of natural gas in the contiguous United States (production + imports) totaled around 647 bcf (or 92.4 bcf/d) for the week ending October 9 (-0.9 bcf/d w-o-w and -8.5 bcf/d y-o-y). The deviation from the norm remained positive but moderated slightly from +5.7 bcf/d to +5.0 bcf/d.

Here’s our latest forecast for the next two weeks:

October 16

  • Total supply: 92.1 bcf/d (-9.9 bcf/d y-o-y)
  • Total demand: 86.5 bcf/d (-1.7 bcf/d y-o-y)

October 23

  • Total supply: 93.3 bcf/d (-9.3 bcf/d y-o-y)
  • Total demand: 91.2 bcf/d (+2.0 bcf/d y-o-y)

Thus, total balance is projected to remain tighter (vs. a year ago), ensuring that the annual storage “surplus” will continue to shrink.

Please note that these forecasts are updated daily.

Source: Bluegold Research estimates and calculations

Natural gas consumption (seven-day average) is projected to decrease by -0.3% over the next seven days (from 71.5 bcf/d today to 71.3 bcf/d on October 16). Overall, daily natural gas consumption is projected to reach a major “seasonal low” on October 10 and is then projected to trend higher (slowly), but is also currently projected to remain mostly below last year’s level (see the chart below).

At the same time, we should remember that the weather forecast can change very quickly and at any moment, so we need to be very careful during this time of the year. Natural gas is primarily a

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Natural Gas Market: Production Falls To A New Multi-Year Low

Natural Gas Market: Production Falls To A New Multi-Year Low

The Weather

Last week

Last week (ending October 2), the number of cooling degree days (CDDs) increased by 6.9% w-o-w (from 33 to 35). At the same time, the number of heating degree days (HDDs) surged by 81.5% w-o-w (from 15 to 26). We estimate that total “energy demand” (as measured in total degree days, or TDDs) was as much as 26.5% below last year’s level but only 1.1% below the 30-year average.

This week

This week (ending October 9), the weather conditions have cooled down substantially in the contiguous United States. We estimate that the number of nationwide CDDs will drop by 20.4% w-o-w (from 35 to 28), while the number of HDDs should rise by 22.1% (from 26 to 32). Total average daily consumption of natural gas (in the contiguous United States) should be somewhere between 70 bcf/d and 72 bcf/d. Total “energy demand” (measured in TDDs) should drop by 10.2% y-o-y, while the deviation from the norm will remain in the negative territory (-8.4%).

Next week

Next week (ending October 16), the weather conditions are expected to warm up, but only slightly. The number of nationwide CDDs is currently projected to edge up by 4.2% w-o-w (from 28 to 29), while the number of HDDs should remain relatively unchanged (at 32). However, total “energy demand” (measured in TDDs) should still decline in annual terms (-24.6%), while the deviation from the norm will remain negative (-13.1%) (see the chart below).

Source: Bluegold Research estimates and calculations

The latest numerical weather prediction models (Wednesday’s short-range 00z runs) agree that, over the next 15 days, TDDs should remain below the norm (on average) but should continue to trend upward – see the chart below. However, there is currently a minor disagreement between the models in terms of scale: the latest

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