Energy Aspects expects tomorrow’s EIA storage number to be a 52 bcf injection. Our initial forecasts for the next three EIA storage weeks are injections of: 79 bcf, 59 bcf, and 63 bcf.
Storage levels have started to climb, and last week’s 10 bcf injection was largely in line with our expectations and those of the market. With overall lower-48 temperatures still looking seasonally mild, HDDs are beginning to lose their sway over demand. Indeed, Henry Hub (HH) cash prices softened at the end of last week on the milder weather before ticking higher in the last two days on some cooler weather. HH cash prices averaged 3.06 $/mmbtu over 11-18 April, down by 4% from the week before.
Forecasts suggest mixed weather patterns across the US for the next two weeks. Prevailing colder-than-average temperatures in the Midwest are expected to give way to milder weather from 24 April. Temperatures in the Northeast are expected to slip just below the seasonal norm from 23 April. The weather is expected to be exceptionally mild in the South Central region and just above normal in the South Atlantic and West.
Indicative data show that US production edged back above 70 bcf/d last week and then rose by 0.3 bcf/d to 70.4 bcf/d in the current week. This is still lower y/y by around 2.2 bcf/d, although we still expect the y/y gap to begin narrowing as we approach the end of Q2 17 and for output growth to return in H2 17.
Exports to Mexico have nosedived over the past few days due to maintenance on the NET Mexico pipeline (2.1 bcf/d capacity) and works at the Agua Dulce compressor station. Over the past four days, flows to Mexico have averaged in the ballpark of 2.5 bcf/d, lower w/w by around 1.1 bcf/d and down y/y by 1.0 bcf/d. This is the lowest level of Mexican exports since summer 2015. The maintenance began around 15 April and is expected to last about a week.
In the current week, US net imports from Canada are down by around 0.17 bcf/d w/w to 5.9 bcf/d. Imports into the Northeast declined the most, down by 0.27 bcf/d w/w as compressor maintenance on the AGT system led Algonquin prices to sag back below 3.0 $/mmbtu. Imports into the Midwest and Northwest regions both increased modestly w/w.
Henry Hub cash is now trading close to 3.11 $/mmbtu, bang on the fuel switch trigger (7,100 gas vs 10,300 coal). Though some colder weather in the Northeast and Midwest could help support hub prices in those regions, overall HH prices are likely to remain subdued on the mild weather outlook, and could possibly fall on the temporarily weaker export demand together with the modest uptick in the latest production data. Cash prices are unlikely to reach either the higher or lower fuel switching levels in the coming two weeks.
|Balance forecasts, bcf/d|
|Source: Energy Aspects|