Natural Gas Report: Natgas Island

March 21, 2014 04:41 AM
 

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Storage levels fell below 1,000 Bcf during the report week, but temperatures across the nation were slightly higher than both the 30 year average and compared to last year at this time. We pondered the use of natural gas as a means of sanctioning Russia in last week's report, but came to the conclusion that infrastructure constraints currently prohibit natgas exports. Only two U.S. locations are approved for LNG exports, and while more approved locations are in the works, its going to take several years before the United States can export significant volumes of natural gas, making the U.S. a natural gas island.index

There has been speculation that in response to sanctions, Russian president Putin may cut natgas supplies running via pipeline through Ukraine into the European Union. He's done it before. The price response here in the States is a matter of debate. If Putin cuts off natural gas supplies to Ukraine, the fact that American natural gas is largely powerless to fill the void may insulate domestic prices, and help U.S. consumers avoid a price spike.

That is one of the benefits of the infrastructure constraints that keep natural gas from flowing out onto the global market. Our domestic supplies are secure, and the impacts of international intrigue are blunted.

Were the United States better positioned to export LNG to Europe or the Ukraine, domestic natgas prices might be threatened by the Crimean conflict. But as it stands, here on natural gas island, the inability to move large volumes of natgas out of the country may be the factor that offsets Putin's natgas empire, and moderates prices for us no matter what the rest of the world decides to do.

  • Inventories stand at 953 Billion cubic feet (Bcf) -- 49.4% below year-ago and 47.9% below the five-year average.
  • This week notes a 48 Bcf net withdrawal from storage.
  • Storage draws were below expectations of 58 Bcf.

 

April '14 natural gas opened today at $4.37 3/4 -- 3/4 cents above last week's Natgas Report. Bulls will target $4.73 and $5.20. Support lies at $4.27 along the way to $4.01 and the January low at $3.85.

chart

The average temperature in the continental United States during the report week was 43.9°F -- that's 0.6°F above the same time last year and 1.0°F above the 30-year average temp.

Prices --

"The Nymex near-month (April 2014) contract opened the report week at $4.49/MMBtu last Wednesday and settled yesterday at $4.484/MMBtu, though there were a few mid-week increases and declines. The 12-month strip (the 12 contracts between April 2014 and March 2015) fell slightly from $4.54/MMBtu last Wednesday to $4.521/MMBtu yesterday," according to EIA.

Consumption --

"Total consumption increased 5.2% week over week, with increases ocurring in all sectors. In the residential and commercial sectors, which primarily use natural gas for heating, demand was highest last Wednesday and Sunday-Monday, the coldest days of the week. Overall residential and commercial consumption rose 7.4% this week. Consumption of natural gas for power generation increased 6.2%, and industrial consumption rose 0.9%," according to EIA.



Indicated text, graph and data provided by EIA.

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