Natural Gas Monthly Fundamental Forecast – May 2016

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Published: Apr 30, 2016, 11:29 UTC

Natural Gas had a rocky month but ended with a gain of almost 10% coming off its lows close to 1.90 to end the month at 2.141 as traders are looking

Natural Gas Monthly Fundamental Forecast – May 2016

Natural Gas had a rocky month but ended with a gain of almost 10% coming off its lows close to 1.90 to end the month at 2.141 as traders are looking forward to climbing temperatures as summer approaches. Baker Hughes reported the active oil rig count fell by 11 rigs to 332 for the week ending April 29. The total number of active oil and gas rigs declined by 11 to 420.

Without a decline in production, natural gas prices will have low demand season to contend with, and this could mean more downside pressure. Weather forecasts show that in the coming week temperatures should be about average, which means there will be little support for natural gas prices, at least from the demand perspective. The five-year average for the week is an injection of around 52 billion cubic feet, and this high injection rate has sparked some concerns that natural gas producers will continue to inject a large amount of natural gas into storage this week, even though supplies remain at high levels.

Delays on and cancellation of other pipeline projects designed to distribute Marcellus and Utica natural gas–including the recent cancellation of the proposed Northeast Direct Pipeline, and the proposed Constitution Pipeline’s failure to obtain a key water quality permit–will constrain gas movement in the key Northeast market.

Working gas in the Lower 48 states posted its first back-to-back reported net injection of the young refill season, which began on April 1. Net injections into storage totaled 73 Bcf during the storage report week, compared with the five-year (2011-15) average of 52 Bcf and last year’s net injection of 84 Bcf during the same week. As a result, the surplus in storage compared with the five-year average rose from the previous week to 832 Bcf, and the surplus compared with year-ago levels decreased to 870 Bcf. Cumulative net injections of working gas during the 2016 refill season total 77 Bcf, compared with the five-year average of 119 Bcf.

The refill season gets underway across the Lower 48 states. Net injections were reported in all five of the storage regions for the first time this year. The East and Midwest regions posted their first weekly net injections of the 2016 refill season, reporting stock builds of 23 and 16 Bcf, respectively. Net injections exceeded or equaled the five-year average in each of the storage regions.

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