Factor - Natural Gas Supply
Commentary
Forecasts are calling for natural gas production to hit a peak this summer. Opinions are mixed on whether post-summer production will continue to mildly decline through the end of 2012, or whether 2012 will see a rebound in both rigs and supply.
Factor - Consumer Demand
Commentary
Cold January weather brought residential / commercial demand for natural gas above forecasts. January 2011 saw demand levels averaging 47.9 Bcf/day, which was 1.2 Bcf/day higher than January 2010. Arctic storms most likely will bring the February 2011 demand above the current forecast of 40 Bcf/day. Since residential-commercial demand is highly dependent on weather, the short-term colder than normal forecast should be bullish for natural gas prices.
Factor - Industrial Demand
Commentary
Estimates suggest that industrial demand for natural gas increased by 2.5 percent (0.5 Bcf/day) in January 2011, with the expectation for a 1 percent (0.2 Bcf/day) increase for February 2011. The Purchasing Managers Index hit 60.8 in January 2011, the highest reading since May 2004. The biggest contributors to this number were new orders and employment. The manufacturing sector is expanding at the fastest rate in six years, which means that industrial gas demand should reap some of the benefits.
Factor - Weather
Commentary
Colder than normal temperatures are expected to continue in February, with below-normal temperatures concentrated in the North-Central, Midwest and Southeast regions of the country. January's Gross Weighted Heating degree Days were 5 percent higher than the 30-year normal and 6 percent higher than January 2010. Overall, the February 2011 to April 2011 period is forecasted to be 2-3 percent colder than the 30-year normal.
Factor - Storage
Commentary
Forecasts call for stored natural gas to be at record high levels coming out of this winter. Expectations are for levels to be around 1.7 TCF, compared with last year's level of 1.64 TCF. Going into this winter, projections were as high as 1.85-2.00 TCF, so the outlook is less-bearish than some forecasters had originally predicted.
Factor - Economy
Commentary
The 4th quarter 2010 Gross Domestic Product growth rate of 3.2 percent was a 0.6 percent increase from the previous quarter, reflecting a narrowing of the trade deficit and an increase in consumer spending by an annualized 4.4 percent. It looks like a slower than normal build in business inventories may have pulled the number down somewhat.
Factor - Summary
Commentary
Natural gas demand, which is up above last year's levels, continues to reap the benefits of a cold winter and a rebounding industrial sector. On the supply side, however, growing production and ample storage inventories are poised to meet the needs of year-over-year demand growth. The economy seems to be recovering slowly, but many economists are cautiously optimistic as the market continues to get mixed signals.
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Factor - Natural Gas Supply
Commentary
Forecasts are calling for natural gas production to hit a peak this summer. Opinions are mixed on whether post-summer production will continue to mildly decline through the end of 2012, or whether 2012 will see a rebound in both rigs and supply.
Factor - Consumer Demand
Commentary
Cold January weather brought residential / commercial demand for natural gas above forecasts. January 2011 saw demand levels averaging 47.9 Bcf/day, which was 1.2 Bcf/day higher than January 2010. Arctic storms most likely will bring the February 2011 demand above the current forecast of 40 Bcf/day. Since residential-commercial demand is highly dependent on weather, the short-term colder than normal forecast should be bullish for natural gas prices.
Factor - Industrial Demand
Commentary
Estimates suggest that industrial demand for natural gas increased by 2.5 percent (0.5 Bcf/day) in January 2011, with the expectation for a 1 percent (0.2 Bcf/day) increase for February 2011. The Purchasing Managers Index hit 60.8 in January 2011, the highest reading since May 2004. The biggest contributors to this number were new orders and employment. The manufacturing sector is expanding at the fastest rate in six years, which means that industrial gas demand should reap some of the benefits.
Factor - Weather
Commentary
Colder than normal temperatures are expected to continue in February, with below-normal temperatures concentrated in the North-Central, Midwest and Southeast regions of the country. January's Gross Weighted Heating degree Days were 5 percent higher than the 30-year normal and 6 percent higher than January 2010. Overall, the February 2011 to April 2011 period is forecasted to be 2-3 percent colder than the 30-year normal.
Factor - Storage
Commentary
Forecasts call for stored natural gas to be at record high levels coming out of this winter. Expectations are for levels to be around 1.7 TCF, compared with last year's level of 1.64 TCF. Going into this winter, projections were as high as 1.85-2.00 TCF, so the outlook is less-bearish than some forecasters had originally predicted.
Factor - Economy
Commentary
The 4th quarter 2010 Gross Domestic Product growth rate of 3.2 percent was a 0.6 percent increase from the previous quarter, reflecting a narrowing of the trade deficit and an increase in consumer spending by an annualized 4.4 percent. It looks like a slower than normal build in business inventories may have pulled the number down somewhat.
Factor - Summary
Commentary
Natural gas demand, which is up above last year's levels, continues to reap the benefits of a cold winter and a rebounding industrial sector. On the supply side, however, growing production and ample storage inventories are poised to meet the needs of year-over-year demand growth. The economy seems to be recovering slowly, but many economists are cautiously optimistic as the market continues to get mixed signals.
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