Energy Aspects expects tomorrow’s EIA storage number to be a 60 bcf injection. Our initial forecasts for the next three EIA storage weeks are injections of: 83 bcf, 76 bcf, and 80 bcf.
Henry Hub (HH) cash prices ticked higher over 10-16 May, as production remained weak and net length in the market stayed high. Cash gained an average of 14 cents/mmbtu w/w to 3.23 $/mmbtu and closed at 3.27 $/mmbtu on Tuesday (16 May), up by 24 cents/mmbtu (8%) w/w.
Prices in the Northeast also edged higher over the week. The Algonquin Citygate price reached 4.1 $/mmbtu on 15 May ahead of routine shoulder-season maintenance on the Algonquin Gas Transmission Mainline over the next fortnight. The maintenance is cutting flows on the pipe by around 60% relative to nameplate capacity at certain affected compressor stations.
Forecasts indicate a cooler trend in the 6-15 day forecasts following up on the heat enveloping much of the eastern third of the US this week. Cooler than normal conditions are expected to dominate, outside of the western US, where a warmer than normal pattern is forecast. If the forecast holds, it should keep demand for air cooling (power) modest.
Despite a few months of persistently low US dry gas production, data are beginning to reveal signs of improvement. In the current week, production is up by 0.2 bcf/d at 70.9 bcf/d, which is a rise of 0.7 bcf/d since 1 April. While still down on y/y levels, this indicates a trend movement upwards on production.
US exports to Mexico continue to flow over 4.0 bcf/d, and in the current week volumes are up by 0.43 bcf/d y/y, albeit largely unchanged w/w. Net imports from Canada have dropped off by 0.5 bcf/d w/w to 5.7 bcf/d in the current week, as US exports to Canada resumed more seasonal flows following the end of Phase 1 maintenance on the Vector pipeline. US exports to Canada averaged 1.7 bcf/d over the past five days, up from around 1.0 bcf/d when works constrained flows.
Given these trade flows, US net gas imports are down w/w by 0.5 bcf/d at 1.6 bcf/d in the week ending 12 May, roughly the same level as last year during the same week. Flows into Sabine Pass remain strong, with volumes averaging around 2.2 bcf/d over the past seven days.
Henry Hub cash has remained strong, trading at just shy of 3.3 $/mmbtu, near the 6,800 gas vs 10,600 fuel switch trigger at that level. A modest weather outlook in tandem with signs of improving production could weigh on cash prices this week, with levels possibly drifting towards the 3.1 $/mmbtu (7,100 coal vs 10,300 gas) switching level. Production readings above 71 bcf/d would certainly soften the curve. Regionally, the ongoing maintenance in the Northeast should help to keep Northeast hubs such as Algonquin supported over the week.
|Balance forecasts, bcf/d|
|Source: Energy Aspects|