Weekly Energy Market Update – Is Natural Gas Market Adequately Supplied for Winter?

Energy Market Update (Week Ending 11/15/13)

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Increase in working gas storage: Working gas in storage was 3,834 Bcf as of Friday, November 8, 2013, according to EIA estimates. This represents a net increase of 20 Bcf from the previous week. Stocks were 80 Bcf less than last year at this time and 58 Bcf above the 5-year average of 3,776 Bcf. This represents a narrowing of the y-o-y deficit from April and signals the market is adequately supplied going into winter.

Marcellus production’s rapid progress: Regionally, storage in the East is -4.4% below year ago levels but its injection of +10 Bcf of the overall national (+20) indicates regional production has been strong as new pipeline capacity opened up on November 1^st . Marcellus production continues to make rapid progress, currently at 13 Bcf/d as reported by EIA last week in the monthly drilling productivity report. The market will be assessing the rate of growth in Marcellus production after new pipeline capacity comes online to see how quickly it is fully utilized.

BY THE NUMBERS

NG Dec ‘13 futures contract closed at $3.66/MMBtu

WTI Dec ‘13 futures contract closed at $93.76/bbl

Coal Cal ’14 futures contract closed at $57.30/ton

COMMODITY FUNDAMENTALS

Natural Gas – Neutral

• The December contract on Friday closed at $3.66 (+9c). Cal’14 settled the week at $3.77, Cal’15 settled $3.96 and Cal’16 settled $4.07.
• An injection of +20 Bcf for week ending (11/8) pushed storage to 3,834 Bcf in what was the final injection of the season.

Crude Oil – Neutral

• WTI moved lower by -$1.0/bbl last week as DOE reported a rise in crude inventories but another overall decline in petroleum inventories.
• Shale production continues to drive growth in U.S. oil production; Bakken oil production is forecasted to reach 1.0 million bbl/d.

Economy – Neutral

• Equity markets (Dow Jones & S&P) reached new all-time highs on expectations that the Federal Reserve will continue its $85 billion a month in asset purchases.
• Empire State Manufacturing index declined to -2.2 (0 is breakeven) for November.

Weather – Neutral

• Forecasts suggest a short break in below normal temperatures before a cold front arrives.
• Weather models over the weekend confirmed a strong cold front arriving later this week from Canada that will blanket much of the country east of the Rockies.

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