I don’t see any big moves to the downside coming anytime soon for the overall market – but 2016 (at least for the first few quarters) is looking like nothing but bearish news. The caveat – a cold winter. It is essentially even money that injections break the record this year heading into winter and withdrawal season. Through last week – injections are averaging 11.3 BCF/d … ~120% of the five year average. 5 weekly injection records have been broken this summer! 1.98 TCF has been injected overall. Another very large injection is expected tomorrow.
El Nino is expected to keep the lower 48 nice and mild this winter – argot – a very small draw on supply, keeping underground supply robust heading into the 2016 injection season (when I think the diminishing rig count will start to catch up to production). Because there will be so much in the ground to start with, it is likely that the fall in production won’t significantly affect the winter supply of gas in 2016.
Supply/Demand: Global baseload demand will increase by little more than 3.3 Bcf/d in 2016, according to Eclipse Energy, another of the analytics and forecasting units of Platts, whereas global supply is expected to increase by 4.3 Bcf/d, leaving the global market about 1 Bcf/d longer by yearend.
Our economy is likely in recession – low energy prices are a key indicator of that. The fact is – economic growth drives prices not the other way around. …. Factory orders, Industrial Production, PMI, and regional Fed Bank reports are all posting their weakest readings since the Great Recession.
From the Dallas Fed:
Texas factory activity was essentially flat in September, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained near zero (0.9), suggesting output held steady for a second month in a row after several months of declines.
Other indexes of current manufacturing activity increased in September, but some remained in negative territory. The new orders index posted a second negative reading but rose 8 points to -4.6, and the growth rate of orders index also remained below zero but rose to -4.3. The shipments index pushed to around zero from -3, and the capacity utilization index posted its first positive reading in eight months, coming in at 4.9.
Perceptions of broader business conditions remained weak in September. The general business activity index, which has been negative all year, rose 6 points to -9.5. The company outlook index plunged to -10.3 in August but recovered somewhat this month, climbing to -5.2.
Labor market indicators reflected employment declines and shorter workweeks. The September employment index posted a fifth consecutive negative reading, falling to -6.1. Twelve percent of firms reported net hiring, while 18 percent reported net layoffs. The hours worked index fell markedly from 0.6 to -11.1, suggesting a decline in workweek length from August.
Price and wage pressures were mixed in September. The raw materials prices index came in near zero—suggesting stable input prices—after a -8 reading last month. The finished goods prices index remained negative at -10.9, although it was up from a multiyear low of -15.7 in August. Meanwhile, the wages and benefits index remained positive but edged down to 15.6.
Caterpillar’s stock price
See what the market thinks about Chenier Energy's stock now.
Iran and Saudi Arabia are going to crank the spigots and flood the market with cheap oil to gain market share. Cheap oil has been a large factor in the plummeting global natural gas prices. Exported LNG was has been a very anticipated product to drive up demand and thus increase the price of nat gas in America. But if it doesn’t make financial sense to pay for liquefaction and transportation – producers will just drop it right back into American pipes. The first LNG export plant owned and run by Chenier Energy
is set to start exporting up to 3 BCF/d within months.
I don’t think we go to 1$ natty and any major drop will likely be limited to the front of the curve simply widening the miniscule contango spread we have now – but I can’t find a reason to think 2016 averages 4$ gas.
That is if everything goes to plan.
“The best laid schemes o’mice an’ men, Gang aft agely”
Notice anything familiar? (green arrows on the prompt chart). Three times over the past few months, bulls have tried to break natty out to the upside of a consolidation formation – and three times they have been denied. Today trade moved to a fresh low of $2.511 alluding the massive psychological $2.50. the market bought the news last week with a very bearish storage number. It will be interesting to see how it reacts with another large injection tomorrow. The way that the November contract sold off to below where the October contract settled would make me think $2.50 gets broken sooner rather than later.
Bullish? Not many technicians put a lot of stock into this indicator – but it looks like a golden cross is inevitable (orange circle). The 100 DMA crosses the 200 DMS to the upside. This would signify a market reversal. That is the only thing that is bullish about this chart.
Natural Gas Inventories currently stand at 3,440 BCF
The EIA reported a net storage injection of 106 BCF for the week ending September 18, 2015. This week’s report was well above the market’s expectation which was centered around an injection of 93 BCF. It is bearish against 96 BCF injected in this same week last year and against the five year average injection for this week of 83 BCF.
Natural gas inventories currently stand at 3,440 BCF which is 466 BCF greater than from this same week last year and 148 BCF greater than the five year average.
This week the market is expecting an increase of ~100 BCF =/- 5 BCF
No change here – 95% chance of a strong El Nino through the end of the winter 2016, weakening in the spring.