Factor - Natural Gas Supply
Commentary
Recent production declines in Wyoming, Oklahoma and the Gulf of Mexico were offset by gains in Texas, Louisiana and New Mexico. So far this summer, dry production is up approximately four billion cubic feet per day (Bcf/d) over last year. It appears the biggest drivers of production growth (i.e., Haynesville, Marcellus shale plays, etc.) will continue to bring on more supply.
Factor - Demand
Commentary
The industrial sector has been a tremendous source of demand growth for natural gas, up about two Bcf/d year-over-year. PIRA Energy Group estimates demand levels over the next three months to average about one Bcf/d above the same period last year. Nevertheless, forecasters are keeping a close eye on the industrial sector as impending EPA regulations may negatively impact manufacturing and chemical companies. Demand from electric generation has been boosted by the intense heat. Many industry weather services are predicting well-above-normal temperatures for the remainder of the summer.
Factor - Weather
Commentary
Cooling degree days, a measure used by professional weather services, were 28 percent above the 30-year average in the month of July. August is also expected to be hotter than normal, by 20 percent. Throw a couple of hurricanes into the mix and the weather outlook is bullish for natural gas prices through the remainder of the summer.
Factor - Storage
Commentary
Through the end of July, natural gas storage inventory levels are still slightly below the five-year average. PIRA projects inventories to end the injection season at just under 3.7 trillion cubic feet, which is 150 Bcf below last year.
Factor - Economy
Commentary
Jobs reports have come in below expectations and the unemployment rate has held above nine percent. The Commerce Department added some economic gloom when they reported second quarter Gross Domestic Product grew only 1.3 percent (versus expectations of 1.9 percent) and revised first quarter growth from 1.7 percent down to 0.4 percent.
Factor - Summary
Commentary
The unseasonably warm weather and a small boost in industrial activity have been the only significant demand drivers in the last few months – and both of these factors seem temporary. In addition, production from non-traditional sources has become much more economically efficient. Barring any hurricanes disrupting Gulf of Mexico production, supply is expected to more than cover near-term demand.
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Factor - Natural Gas Supply
Commentary
Recent production declines in Wyoming, Oklahoma and the Gulf of Mexico were offset by gains in Texas, Louisiana and New Mexico. So far this summer, dry production is up approximately four billion cubic feet per day (Bcf/d) over last year. It appears the biggest drivers of production growth (i.e., Haynesville, Marcellus shale plays, etc.) will continue to bring on more supply.
Factor - Demand
Commentary
The industrial sector has been a tremendous source of demand growth for natural gas, up about two Bcf/d year-over-year. PIRA Energy Group estimates demand levels over the next three months to average about one Bcf/d above the same period last year. Nevertheless, forecasters are keeping a close eye on the industrial sector as impending EPA regulations may negatively impact manufacturing and chemical companies. Demand from electric generation has been boosted by the intense heat. Many industry weather services are predicting well-above-normal temperatures for the remainder of the summer.
Factor - Weather
Commentary
Cooling degree days, a measure used by professional weather services, were 28 percent above the 30-year average in the month of July. August is also expected to be hotter than normal, by 20 percent. Throw a couple of hurricanes into the mix and the weather outlook is bullish for natural gas prices through the remainder of the summer.
Factor - Storage
Commentary
Through the end of July, natural gas storage inventory levels are still slightly below the five-year average. PIRA projects inventories to end the injection season at just under 3.7 trillion cubic feet, which is 150 Bcf below last year.
Factor - Economy
Commentary
Jobs reports have come in below expectations and the unemployment rate has held above nine percent. The Commerce Department added some economic gloom when they reported second quarter Gross Domestic Product grew only 1.3 percent (versus expectations of 1.9 percent) and revised first quarter growth from 1.7 percent down to 0.4 percent.
Factor - Summary
Commentary
The unseasonably warm weather and a small boost in industrial activity have been the only significant demand drivers in the last few months – and both of these factors seem temporary. In addition, production from non-traditional sources has become much more economically efficient. Barring any hurricanes disrupting Gulf of Mexico production, supply is expected to more than cover near-term demand.
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