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Energy News and Market Information for the week of 09/14/2015


Market News

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Data Highlights

 

WTI crude oil futures

9/15/2015: $44.59/bbl
down$1.35 from week earlier
down$48.33 from year earlier

Natural gas futures

9/15/2015: $2.728/mmBtu
up$0.018 from week earlier
down$1.203 from year earlier

Retail gasoline price

9/14/2015: $2.375/gal
down$0.062 from week earlier
down$1.033 from year earlier

Crude oil inventories

9/11/2015: 455.9 mmbbl
down2.1 mmbbl from week earlier
up93.6 mmbbl from year earlier

Weekly coal production

9/5/2015: 18.616 million tons
down0.086 million tons from week earlier
down0.024 million tons from year earlier

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Author: Jason Scarbrough

Natural Gas

Boring(neutral)

Traders and hedgers are likely looking ahead to winter and at storage build.  After this week’s report (there was some high cooling demand last week), cooling demand is likely over – it doesn’t look like and Indian summer will occur in 2015.  This should and will cause some very large builds heading into winter.
 


El Nino has acted as a shield in the Gulf– deterring the Atlantic cyclones from the African coast to either die an early death, or throwing them back out  into the northern Atlantic.  And while gulf production is essentially meaningless these days (~7% of production), a good ole fashioned scare rally could have gotten the bulls above the $3.10 level and on to a new and higher trading range – this is the first summer I can remember without at least one spike in prices for either power or natural gas.  Hence the repetitive market updates.  

El Nino is also likely going to cause a very mild winter for the traditional heating demand regions of the US –  therefore if underground storage is at or close to record levels when withdrawal season begins,  levels will start the injection season at very high levels historically.  This should drive the front of the curve down a good bit – perhaps even testing the 2012 low of $1.92.  
That is if everything goes according to plan



Keep in mind that the back end of the curve is not likely to tumble even if the front end does so – there is far too much bullish news for natural gas down the road beginning with Chenier beginning to export 1 BCF/day this winter or first quarter of 2016.  That coupled with the historic low rig counts would tell me to take advantage of this opportunity.  There is at least a six mointh lag to get wells going again and there is bound to be a significant drop in production at some point, right?????? 
 
 

Technicals

Bearish



MACD started to point bullish last week  - but still looks like it will remain sideways.  That is about the only bullish sign we have had out of the prompt chart in a while.  It looked like there was a breakout of the consolidation pattern to the upside Monday – however, the rally stalled at the fibinacci 38% retracement -  Tuesday and today are showing that was a false breakout – a very bearish signal.  And a very similar move to the last break out to the downside back in august (shown by arrows).  

Likely that natty will head lower as we head into OCT – but still in a very narrow trading range of ~ 2.60-2.75.   the uptrend was broken and likely a breakout of this consolidation formation will also be to the downside.  – I look for the YTD low of $2.44 to be tested.

One thing I am watching is for the 50 and 100 day moving averages to cross the 200 day moving average (red) forming a “golden cross”  - which can be a signal of a market reversal.  I don’t see how that would happen, but I am strictly speaking technical analysis. 

 


Storage

Natural Gas Inventories currently stand at 3,261 BCF 
 

 
Don’t Let The Knee-Jerk Reaction By The Jerks On The NYMEX Spook You.  Last Week’s Report Was Bearish
Last week the EIA  reported a large addition of natural gas. Yes, just because the Crowd muffed the forecast, does not  take away from the fact that yesterday's report was large.  For the week ended September 04, a total of 68 BCF was added to the ground.  63 is the five year average. 





Total  inventories  in  the  lower 48 states  climbed to3.26 Tcf. The surplus to a year ago fell to 16%,  but the disposition to the 2009-2013 average switched from  a 3 Bcf deficit, to an 8 Bcf surplus. Recall, at the end of last winter the deficit to this timestep was 20% or 354 Bcf.

Up through last week, additions are averaging 11.2 Bcf/d, or 1.21× the five-year average. As a result, a very large 1.80 Tcf of gas has been restocked thus far, the fourth largest on record

Last week – cooling demand was pretty firm – but the warm weather disappears this week and likely some very large builds are coming.  

Tomorrows Estimates are in the Low to mid 70’s – the five year average is 75


 
 

Weather

First named storm coming off coast of Africa

The 6-10 day forecast is for warmer than normal temps across the US.  However “warmer than normal”  does NOT equate to CDD’s given that Houston is looking at low 80’s and  the Midwest and Northeast are looking at temps in the 60’s/70’s – note the heat index outlook showing low temps.



It looks like we are past the cooling demand and will start to look at the winter ahead – which El Nino may have a major impact. 

El Nino
There is an approximately 95% chance that El Niño will continue through Northern Hemisphere winter 2015-16, gradually weakening through spring 2016.



What does this mean ----- likely a very mild winter – argot a lower than normal draw on natural gas storage.  The lower 48 should see cooler and wetter than normal weather and the northern latitudes would be warmer  and dryer.  Essentially the opposite affect from the polar vortex.





In addition – after the 4 year drought in place on the west coast – record amounts of rain could hit the dried out region.  While the region does need rain – this can also cause major mudslides and flash flooding