Factor - Natural Gas Supply
Commentary
Natural gas production was expected to peak between April and June of 2011. Instead, consistent onshore
supply growth—driven by the major shale plays—has continued to provide about 4 billion cubic feet per day
(Bcf/d) of year-over-year production growth and has shifted the anticipated peak to early -2012. The other
contributors to supply (LNG, Canadian exports) have declined slightly to moderate the overall supply
increase.
Factor - Demand
Commentary
All of the demand sectors are contributing to substantial year-over-year growth. Natural gas continues to
expand its share of the electricity market at the expense of coal. Residential and commercial demand is
ramping up as cooler temperatures spread over the country. Plus, industrial demand growth, fueled by low
prices, has so far managed to elude the latest snag in economic activity.
Factor - Weather
Commentary
This winter is expected to follow a classic La Niña pattern starting in mid to late-November: cold and wet
in the northern half of the country; mild and dry in the south. Until then, lingering heat from a
record breaking summer should provide most of the country with warmer-than-normal temperatures.
Factor - Storage
Commentary
Storage inventory levels have caught up to the five-year average after spending the last five months below
it. Since both supply and demand have increased by about 3 Bcf/d since last year, the end of the storage
injection season is expected to play out the same way it did last year: an aggressive injection rate and
inventories peaking in excess of the historical norm.
Factor - Economy
Commentary
The rollercoaster ride continues for the economy. The initial estimate of 3rd quarter GDP growth will be
released at the end of October, and recent indicators do not make a convincing case for robust economic
growth. Consumer spending has increased modestly, but only for non-durable goods. Real disposable income
has declined for two months and the unemployment rate has been above 9 percent for 27 of the last 29
months.
Factor - Summary
Commentary
The biggest source of downward pressure on natural gas prices will continue to be production growth,
persistently exceeding expectations. For the past year, demand growth has managed to keep up with the
gains in supply, but it has done so with an exceptionally cold winter and then a record-breaking summer.
Looking forward, both the weather and the economy are expected to play a role in keeping the gas market
balanced.
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Factor - Natural Gas Supply
Commentary
Natural gas production was expected to peak between April and June of 2011. Instead, consistent onshore
supply growth—driven by the major shale plays—has continued to provide about 4 billion cubic feet per day
(Bcf/d) of year-over-year production growth and has shifted the anticipated peak to early -2012. The other
contributors to supply (LNG, Canadian exports) have declined slightly to moderate the overall supply
increase.
Factor - Demand
Commentary
All of the demand sectors are contributing to substantial year-over-year growth. Natural gas continues to
expand its share of the electricity market at the expense of coal. Residential and commercial demand is
ramping up as cooler temperatures spread over the country. Plus, industrial demand growth, fueled by low
prices, has so far managed to elude the latest snag in economic activity.
Factor - Weather
Commentary
This winter is expected to follow a classic La Niña pattern starting in mid to late-November: cold and wet
in the northern half of the country; mild and dry in the south. Until then, lingering heat from a
record breaking summer should provide most of the country with warmer-than-normal temperatures.
Factor - Storage
Commentary
Storage inventory levels have caught up to the five-year average after spending the last five months below
it. Since both supply and demand have increased by about 3 Bcf/d since last year, the end of the storage
injection season is expected to play out the same way it did last year: an aggressive injection rate and
inventories peaking in excess of the historical norm.
Factor - Economy
Commentary
The rollercoaster ride continues for the economy. The initial estimate of 3rd quarter GDP growth will be
released at the end of October, and recent indicators do not make a convincing case for robust economic
growth. Consumer spending has increased modestly, but only for non-durable goods. Real disposable income
has declined for two months and the unemployment rate has been above 9 percent for 27 of the last 29
months.
Factor - Summary
Commentary
The biggest source of downward pressure on natural gas prices will continue to be production growth,
persistently exceeding expectations. For the past year, demand growth has managed to keep up with the
gains in supply, but it has done so with an exceptionally cold winter and then a record-breaking summer.
Looking forward, both the weather and the economy are expected to play a role in keeping the gas market
balanced.
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