Natural Gas Monthly Fundamental Forecast May 2014

Outlook and Recommendation

Natural Gas ended the month at 4.834 close to its monthly high as traders worried about the production of gas to replace the low inventory levels after the record cold winter burned up a larger inventory than expected. Natural gas net storage injections for the Lower 48 totaled 82 billion cubic feet (Bcf) for the week ending on April 25. This was the fourth consecutive week of net storage injections, which this year began in the week ending on April 4. Over this period, cumulative net injections totaled 163 Bcf, a 53% increase when compared to the same weeks in 2013, but only 8% above the 5-year average for these weeks of 151 Bcf. Total Lower 48 working inventories totaled 981 Bcf, an 11-year low. This was well below the 2009-13 minimum for that week of 1,716 Bcf, as can be seen from the storage graph below this article. It is also the latest point in the year that inventories have remained below 1,000 Bcf since 2003. Despite a steady increase in natural gas supply, current high spot prices coupled with comparatively low price expectations for the upcoming winter season, when stored volumes are likely to be withdrawn, have put a damper on natural gas storage injections in Apr

There are other factors beyond direct economic considerations that drive storage builds. These include competition for available supplies from current consumers, and the need for local distribution companies (LDCs) to ensure there are adequate supplies in storage for the upcoming winter withdrawal season. Although expected returns from storage in April 2014 were slightly lower than in April 2013, net injections increased, due largely to a 3% decrease in total consumption coupled with a 3% increase in total supply. Despite high consumption in the middle of the month, particularly from the electric power sector (power burn), overall power burn in April was down by 5% compared to last year, averaging 17.8 Bcf/d, while residential and commercial consumption was down by 3%, averaging 23.2 Bcf/d

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

 

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