Natural Gas Fundamental Analysis – August 31, 2015 – Forecast
Natural Gas soared 54 points to trade at 2.716 after yesterday’s EIA inventory report and warmer weather across the US.
Electric plants are switching from coal to cheap natural gas and production growth rates are slowing. It was the same in 2012, when natural gas prices plunged below $2/MMBtu. This time the price was stopped at $2.5/MMBtu and it might be a more gradually sloping recovery.
US production became very sensitive to natural gas prices with the shale gas boom. Growth rates can be increased in relatively short time to two-digit numbers in response to high prices. The price of $4.5/MMBtu (and higher) is likely enough to urge companies to produce much more gas.
The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 69 billion cubic feet for the week ending August 21. Analysts were expecting a storage injection (increase) of 61 billion cubic feet. The five-year average for the week is an increase of around 61 billion cubic feet, and last year’s addition for the week totaled 88 billion cubic feet.
August 27-Sept 3rd: A stronger than normal weather system will bring another round of showers, thunderstorms, and cooler than normal temperatures over the Midwest and eastern US this week, including briefly into portions of the southern US. Warmer temperatures will slowly gain ground next week east of the Rockies, but still with weak weather systems bringing just enough showers and cloud cover to keep national nat gas demand MODERATE, including clouds and rains from TS Erika. The West will be warm this week but cooling next week as Pacific systems move inland.
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