Thursday, August 12, 2010

EIA: Storage: +37 Bcf to 2.985 Tcf

Yet again the weekly EIA working gas in storage report showed a smaller build in natural gas storage than recent historical indicators.  This week, the net injection was 37 Bcf, bringing the total to 2.985 Tcf.  The net injection for this week was well below last year's (+63 Bcf) and just slightly below the five year average (+39 Bcf).  The current storage levels are now 5% below last year's record pace and 7.9% above the five year average.

5 comments:

William said...

The continued widening of the spread against last year is very significant. The gap continues to widen, even though all of the operators in the HS are still drilling at a rapid pace to hold acreage.

Chesapeake has announced that once it has its acreage held by production, it will stop drilling for dry gas until prices reach $6.00. We're bound to see very serious production declines once that happens, in 2011. We very well may be seeing the beginnings of a serious decrease in supply over the next 24 months or so.

-Bill Mendenhall

Robert Hutchinson said...

Thanks, Bill. It's too bad we can't see aggregate production and consumption data in real time (hard enough to do it with several months lag!) to truly understand the storage dynamic. We can infer, obviously, but hard data would be nice.

PAPA ROACH said...

Robert, we actually can see real time S/D data, Bentek Energy has the Cadillac of this information. Daily US gas production is running at record highs now.

Robert Hutchinson said...

Papa:

I should clarify that the rest of us schmoos who depend on public information don't see it in real time!

What does the data say about consumption? Obviously the utilities are burning it up, but what about other sectors? I haven't delved into the public data in a long time.

PAPA ROACH said...

William,

A few things on your thought.

First, we are currently having the hottest summer in meteorological history right now, power generation is through the roof to meet cooling loads. This is why the injection pace has been slower thusfar, and as a contrast, we had a very cool summer last year with several states actually having the coolest July on record.


Overall production is running at all time record highs now, and a couple BCF/day more than this time last year. Obviously this is being masked by the incredible cooling loads in electrical generation this summer.

As far as declines coming in, you must remember that there is going to be large growth from Marcellus, Eagleford, etc etc, even the companies that say they are targeting liquids and oil shale will still have large gas components in that hydrocarbon stream. Focusing only on Haynesville, if every drilling rig in the play was layed down right now, there are still somewhere near 300+ drilled wells awaiting completion via frac and/or gathering hookups, so supply growth can continue for awhile yet from this play. There is also plenty of HBP drilling to do still so we will not see a large drop off yet.

Cashflow is still so important for many that they cannot afford to stop drilling and MANY companies have layered into long dated forward curve sales, effectively hedging large forward sales volumes out on the curve to capture better pricing and alowwing them to continue to produce.

It is my belief that we have roughly another 9-12 months before we may start to see any meaningful supply declines that will illicit the start of a bullish gas market again. And when we get to that point, the way shale can be "manufactured", we will likely also see limited upside potential compared to what we have seen over the past decades bull markets as supply can rapidly be ramped up to meet a higher curve.

Without a new round of solid economic growth, and I mean true growth not the manufactured BS growth out of Washington, the demand components will not be bullish in industrial and commercial categories. This summer has been an absolute blessing for the E&P industry with heat to mask the supply growth.