Author Archives: Mike Pomorski

For anyone that wondered what we would do with the record volume of natural gas placed in underground storage to begin the 2009-2010 winter heating season, the answer in recent weeks has been – consume it! The question of the winter may be whether extreme cold can rebalance the historically high storage levels that are a relic of recession-destroyed demand.

However, to reach the five-year average season ending storage inventory of about 1.36 Tcf would require huge, consistent, and unlikely withdrawals every week during January and February. This reality check may be one of the factors influencing natural gas futures prices for the balance of 2010 – prices that except for November and December are currently below $6 per MMBtu.

Another, non-weather related demand wildcard is manufacturing, which expanded for the fifth straight month to its highest level in almost four years according to the Institute for Supply Management’s ISM Manufacturing Index.

Visit this link to download the full Natural Gas Market Indicator. Topics covered include: Reported Prices, Weather, Working Gas in Underground Storage, Natural Gas Production, Rig Counts, Pipeline Imports and Exports, and LNG Markets.

The significant cold snap in December resulted in a 110 Bcf demand day on December 10. While 100 Bcf plus consumption days are not uncommon as
peaks, they more usually happen in January or February not early December. Heating load, industrial process and plant heating, additional power generation requirements have all contributed to the robust December consumption.

On the supply side, temporary production area well freeze-offs that are not uncommon in the intermountain west during cold periods extended to other areas and probably contributed to the strong withdrawals from storage in mid-December.

The argument can be made that while a decided shift to more onshore production creates protection from hurricane induced supply disruptions, it also adds sensitivity to extremely cold conditions and that flowing production could be impacted more now than when productive capability was more centered in the gulf region.

Visit this link to download the full Natural Gas Market Indicator. Topics covered include: Reported Prices, Weather, Working Gas in Underground Storage, Natural Gas Production, Rig Counts, Pipeline Imports and Exports, and LNG Markets.

The large weather system sporting snow and cold that covered two-thirds of the United States last week pushed seasonal demand to over 100 Bcf for a single day on December 10, which is relatively early in the winter heating season for a peak demand day.

Fortunately, the country was well-prepared for the event with storage bursting at the seams and with production, imports from Canada and LNG responding to market requirements. In the middle of the storm, energy commodity prices for natural gas, oil and coal actually declined after the initial reaction to the coming weather event, then bobbed up and down in relatively narrow bands.

Price movements during the storm generally confirm a strong supply position for winter heating season fuels, in general.

Visit this link to download the full Natural Gas Market Indicator. Topics covered include: Reported Prices, Weather, Working Gas in Underground Storage, Natural Gas Production, Rig Counts, Pipeline Imports and Exports, and LNG Markets.