Tag Archives: EIA

Time to seize a prosperous future fuelled by natural gas

Compared with coal, natural gas produces half the carbon dioxide, less than a third of the nitrogen oxide and just one per cent of the sulphur dioxide, with virtually no particulates. That China is looking to import LNG from B.C.’s shale gas is good news for both Canada and for the Earth’s atmosphere. But LNG will only slow China’s massive coal-fired power growth. Here’s the really good news. According to the U.S. Energy Information Administration (EIA), China possesses the world’s largest technically recoverable shale gas reserves that, at 1,115 trillion cubic feet, are almost twice as large as Canada’s. These vast resources remain undeveloped due to the early stage of Chinese recovery technology. That’s why the University of Calgary’s announcement of a new Canadian/Chinese Research Centre aimed at unlocking that potential is so newsworthy. At the signing ceremony in Beijing on October 23, U of C President Elizabeth Cannon stated that the project “will help China move from a coal economy over to gas.”

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Natural gas futures fall on inventory buildup

US natural gas in storage increased by 98 Bcf from the previous week to sit at 2,354 Bcf as of Friday, June 17, 2011, according to US Energy Information Administration (“EIA”) estimates. Analysts polled by Platts expected an increase between 87 and 91 Bcf for the week. Natural gas for July delivery declined on the EIA report. The EIA and many analysts believe that strong production along and moredate summer weather conditions will push natural gas in storage to near-record levels ahead of the winter heating season.

Kyle Cooper, managing partner IAF Advisors in Houston was quoted in the WSJ.com as stating:

“Storage is the difference between supply and demand. To put 98 bcf in the ground means you’re roughly 14 bcf per day of excess supply.”

According to Baker Hughes Inc. the number of rigs drilling in the U.S. for natural gas has fallen to 870 rigs from about 1,000 last summer. However, The number of rigs drilling for oil has increased significantly to nearly 1,000 – and many of these oil rigs produce high volumes of natural gas.

Natural gas futures advance; supplies grow less than expected

U.S. natural gas inventories had a net increase of 31 Bcf, for a total of 1,685 Bcf in storage as of Friday, April 22, 2011, according to Energy Information Administration (“EIA”) estimates released yesterday. Analysts expected a boost of 37 billion to 41 billion cubic feet, according to a survey by Platts.

Traders had natural gas futures up today (~1.1%) on the speculation that warm weather and fewer natural gas drilling rigs which dropped by seven rigs for a third consecutive report from Baker Hughs. Rig count is down 4.5% for the year. A new rig count is expected out today.

Meanwhile hot weather in the Southern US states may see an early start to the air conditioning season and increase natural gas consumption at a time when production is potentially declining. And as such natural gas goes into one of its weather swings that makes natural gas prices challenging to predict.

Phil Flynn, an analyst with PFGBest in Chicago, is quoted in Business Week as stating;

“We had an inventory level that was supposed to be impenetrable. We’ve had a few bullish stockpile reports, and people are wondering if there’s an issue with production.”

A potential increase in natural gas prices still leaves it in the affordable category compared to recent oil prices and the EIA sees increased production of natural gas liquids (NGLs) which set an all-time record in 2010, topping 2 million barrels per day.

Natural gas futures down on lower then expected decline in US supplies

Yesterday, US natural gas futures added to losses Thursday after a weekly report from the Energy Information Administration reported a lower-than-expected decline in supplies. Natural gas for April delivery retreated 12 cents, or 3%, to $3.81 per million British thermal units; it traded at $3.86 per million Btus moments before the data release. The EIA reported a decline of 71 billion cubic feet for natural gas in storages in the week ended March 4. Analysts polled by Platts had expected a decline between 78 and 82 bcf.

US Natural gas supplies fall a little more then expected

US Natural gas supplies fell more than expected last week as another round of cold weather swept across much of the northeast United State. US natural gas had a net decline of 174 Bcf to sit at 2,542 Bcf in storage as of Friday, January 21, 2011, according to Energy Information Administration (“EIA”) estimates. Stocks were 9 Bcf higher than last year at this time and 29 Bcf above the 5-year average of 2,513 Bcf.

Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expected supplies to fall by 168 billion to 172 billion cubic feet.


US natural gas in storage record high on only 3 Bcf – prices down

US natural gas in storage was up 3 Bcf to stand at a new record high of 3,843 Bcf (0.3% higher then 2009 record) as of Friday, November 12, 2010, according to the weekly report from the Energy Information Administration (“EIA”). Although the injection was lower than expected, markets still responded to storage levels breaching 2009 heights and as a result,  natural gas prices dipped down below $4. Inventories are now 13 Bcf higher than last year at this time and 327 Bcf (9%) above the 5-year average of 3,516 Bcf. At 3,843 Bcf, total working gas is above the 5-year historical range.

So we are now at the tipping point. As always and despite delays, winter arrives. Once winter season kicks in, consumption of natural gas in storage will be greater and faster then production can add into the system – regardless of current production levels (which are higher then historical levels). This is apparent with the single digit injection into the system. So we enter into a normal winter cycle for natural gas. Not quite.

As stated last year on HRN at this time, the trend to watch here is how the US has now set two consecutive storage records at the beginning of the winter heating season. Gas stockpiles may total 1.776 trillion cubic feet at the end of this winter heating season in March, up about 114 billion cubic feet from a year earlier, according to Energy Department estimates. Under average winter condititions this means that the winter heating season will end with a record amount of natural gas still in storage while producers continue to lower costs and increase production. To illustrate, lets say it takes 50 litres of gas to fill your tank. You let it run bone dry and put 50 litres in each week. But you dont drive as much, and when it comes to your weekly fill of 50 litres, your tanke is not bone dry. To emphasize, think if you then try to add 60 litres one week. You get the point.

US producers recognize this trend. In Canada, there has always been a surplus of natural gas and they have been a net exporter – to the US – of natural gas. However, with the US production levels reaching new highs, the US is also facing the probabilites of being a net exporter of natural gas (See HRN: US to provide clean low cost energy to China)

If you read any of the articles on the Horn River News you are aware that HRN is pro-natural gas as a cleaner alternative energy source to oil and coal. It is now clear that production from shale gas has proven the abundance of natural gas available in the US and Canada. Its a free market so if producers can not sell their gas in North America they sill seek markets overseas. Fair enough. But we continue to emphasize this is a opportunity lost that may have huge negative impact on North America down the road. By exporting lower carbon energy sources we are exporting an energy resource that will become increasingly important in a world pressured to lower carbon emissions (not to mention the economic benefits of domestic energy – compared to acquiring energy from “unfriendly” US sources. See Pickens’ Plan).

So as we see a trend to increasing natural gas supplies, Canada and the US can either increase domestic usage of this surplus or export it to the benefit of others. In Canada’a case their will always be a net surplus for export – perhaps referrably to the US – but in the US, this surplus can be easily put to good use, with extra supplies readily available from an established Canada-US distribution system. The bottom line is this resembles the same relationship Canada and the US had previous to the shale gas boom. But now with greater volumes of natural gas readily available, we simply need to increase consumption in transportation and power generation to offse some of the oil and coal used in these areas.

US natural gas in storage increases more then expected… again.

There seems to be nothing that will change the continued trend of the increasing amounts of natural gas being injected in the storage system. We won’t go into all the various reasons in detail as it has been covered in previous posts. Mild weather, moderate hurricane season and the continued high production levels of natural gas producers… that’s it in a nutshell.

Working gas in storage increased by 85 Bcf to a total of 3,499 Bcf as of Friday, October 1, 2010, according to the US Energy Information Administration (“EIA”) estimates. Analysts polled by Platts were expecting a net injection of 74 billion to 78 billion cubic feet.Stocks were 149 Bcf less than last year at this time and 220 Bcf above the 5-year average of 3,279 Bcf. At 3,499 Bcf, total working gas is within the 5-year historical range but certainly well into the top half of this range.

Last year at this time, natural gas in storage was above the 5-year historical range. Net injections into storage were “more then expected” and a late start to the winter heating season saw natural gas approach its physical storage capacity of ~4,000 BCF.

Basic numbers would suggest that if net increases were on average 70 Bcf, the US would reach its physical storage capacity around in 6-7 weeks in late November, early December. The winter heating season officially starts on November 1st, and last year’s “late start” was November 10th. The bottom line here is there is low risk of natural gas hitting storage capacity, and high probability that the winter heating season (late or not) would begin to reduce net injections and subsequently draw down on inventories.

And as stated many times before, shale gas production should not be cut but increased, along with the increased usage of natural gas within our transportation and power generation networks.

US natural gas in storage increases 103 Bcf – Short sellers cover

US natural gas in storage increased by another 103 Bcf to a total inventory of 3,267 Bcf as of Friday, September 10, 2010, according to Energy Information Administration (“EIA”).

Stocks were 182 Bcf less than last year at this time and 192 Bcf above the 5-year average of 3,075 Bcf. Comparing to last year is not as relevant as the five year average as last year was a year of above average natural gas in storage.

Despite the increase, natural gas prices were up for the fifth straight day as concerns that a tropical storm may evolve into a Gulf of Mexico hurricane were enough to have short sellers covering.

Steven Schork, president of Schork Group Inc., a consulting company in Villanova, Pennsylvania was quoted in a Bloomberg report;

“There are worries about the potential storm and traders are covering some shorts.”

At this point the possiblity of a Gulf Hurriance reaching the coast of the US and disrupting natural gas supplies is still not probable… just possible. And if a hurriance fails to materialize then the five day run on increasing natural gas prices will likely be short lived as natural gas producers continue to inject more natural gas into the system.

Teri Viswanath a director of commodities research at Credit Suisse Securities USA in Houston stated in the same Bloomberg article:

“We are now going to whittle down the year-over-year storage deficit and we believe the next three successive storage injections are going to be very big unless we have a Gulf shut- in.”

Time will tell. And in the meantime the traders will speculate and ignore the fundamentals in the short term betting on or against the weather and its potential impact on natural gas supplies from the Gulf.

Natural gas in storage as summer comes to an end and lower prices are predicted

Natural gas in storage  increased by 58 Bcf from the previous week for a total of 3,164 Bcf in storage as of Friday, September 3, 2010, according to US Energy Information Administration (“EIA”). This represents a net. Stocks were 218 Bcf less than last year at this time and 166 Bcf above the 5-year average of 2,998 Bcf.

And as summer comes to an end and temperatures moderate demand will for gas- fired electricity to run air conditioners will moderate as well.  A Bloomberg News survey reports that “7  out of 18 analysts, or 39 percent, forecast gas futures will decline on the New York Mercantile Exchange through Sept. 17. Five, or 28 percent, predicted prices will rise and six said there would be little change. Last week, 41 percent of participants said gas would fall.”

Natural gas prices have come off nearly 24% since the end of July as higher amounts of natural gas in storage were suffecient to meed demand from gas-fired power plants.  About 23% of U.S. electricity is generated using natural gas, according to the US Energy Department.

Bloomberg: Natural Gas Futures Seen Falling Next Week as Cooler Weather Cuts Fuel Use

Natural gas prices remain deflated as storms pass by… maybe.

Its well known that natural gas is a seasonal trader. Demand for natural gas is higher in hot summer weather where consumers crank up their air conditioners and in the winter when consumers crank up their heaters to stay warm. Prices can be effected up or down depending on whether temperatures – especially in northeast US – are extreme or moderate.

The other weather wild card is the hurricane season.  Hurricane activity is highest in late summer when the difference between temperatures aloft and sea surface are the greatest. As tropical storms move across the Gulf of Mexico they grow in strength fed by the warm waters of the Gulf and often reach hurricane strength. Hurricanes often will not lose strength until they have come ashore and moved inland where the cooler temperatures of the land remove the fueling effects of the warm Gulf waters. As we know the impact of hurricanes on coastal communities are devastating. Amoung the loss of human life, homes, infrastructure, power, etc. is the potential disruption of natural gas supplies from the Gulf of Mexico – home to ~11% of US domestic natural gas production.

Case in point was in 2007 when Hurricane Katrina and Hurricance Rita. The combination of these two hurricanes had an extraordinary impact on the offshore oil and gas industry in the Gulf of Mexico. The Minerals Management Service (“MMS”) estimated that 3050 of the 4000 platforms in the Gulf and 22,000 of the 33,000 miles of pipelines were in the direct path of either
Hurricane Katrina or Hurricane Rita. Fortunately, there were no oil spills or loss of life but the impact was the shut in of 100% of oil production during both storms and ~95% of natural gas production shut in during Katrina.

Such a major forced shut in of natural gas production from the Gulf during a time of higher demand was a major contributor of sending natural gas $14.50. It is also where many energy speculators like natural gas advocate T. Boone Pickens made a fortune by betting on higher natural gas prices due to an active and disruptive hurricane season reports (predictions). Today, this is not a bet that T. Boone Pickens or any other gas trader would likely make as the hurricane season has been a non-event. (Thankfully. The Gulf has had enough disasters and could use all the breaks they can get).

Those on the buy side of natural gas are buyers simply because they believe natural gas is under-valued or perhaps they have been caught in a short squeeze and are covering (not many but a few).

There is of course always the possibility that a  hurricane does form. Today, the National Hurricane Center announced that Tropical Storm Fiona had formed east of the Leeward Islands. Initial projections show Fiona heading toward the East Coast.  However, even if Fiona did materialize it is uncertain if this hurricane would have the strength of Katrina, or if it did would a short term disruption of 95% of the natural gas production have the same impact on prices given the comparative lower industrial demand, and the increased production from shale gas basins across North America. Demand and production were much different in 2007.

But though increased onshore gas production from shale formations around North America have contributed to lower prices for most of 2010, the US Energy Information Administration recently reported that production from the 48 states decreased by 1.2% between May and June to ~64.3 billion cubic feet per day. This has been reflected in the lower then average weekly injections into the US natural gas supply in storage.

In the meantime, we remain in a period of higher supply and lower demand. And the opportunity, to take advantage of increased natural gas reserves as a lower carbon energy source making up for a larger part of the overall energy mix is still there.