Schork Oil Outlook: This Summer's 'Disappearing' NatGas
Founder and Editor, The Schork Report
Where did all the natural gas go this summer? Into the ground!
As if you needed to be told, this is a hot summer. According to data from NOAA, June 2010 average temperature for the contiguous United States was 71.4°F or 2.2°F above the long-term average (1901-2000). As a result, the U.S. had the 8th warmest June on record (116 years). North Carolina, Delaware and New Jersey, the most densely populated state in the country, all reported record warmth. Cooling demand was very strong for market areas in the East, Midwest, Southeast and Southwest.
July posted the 17th warmest on record with an average temperature of 75.5°F or 1.3°F above the long-term average. Cooling demand in the East was again very high, but eased elsewhere.
For instance, temperatures in two of the largest markets for gas-fired cooling demand, Texas and Oklahoma saw considerably cooler Julys. Oklahoma shifted from the 6th warmest June to only the 47th warmest July, while demand in Texas moved from the 8th warmest June to the 90th (!) warmest July.
In both June and July the West consuming region was spared the heat. The weather patterns reflect the composition of this season’s restocking of natural gas supplies.
To wit, this has been one of the strongest refill seasons ever seen out west. Injections are thus far averaging 1.41 Bcf/d or 10% above last year’s pace and 11% above the 2004-08 average. On the other hand, injections in the East are averaging a lowly 6.24 Bcf/d which is 16½% below a year ago and 8% below the average from 2004-08.
Finally, despite three consecutive reported withdrawals, injections in the GoM producing area are averaging 3.34 Bcf/d or 34% (!) above a year ago and 43% (!!) above the 2004-08 average. As such, the year-on-year deficit has narrowed from a winter high of 142 Bcf to 103 Bcf and the surplus to the average from 2004-08 has increased from 31 Bcf to 174 Bcf. And, this has occurred despite record heat in the East.
As we head towards the final ratchet of the season, stocks in the East are still 1.4% above the five-year average. Therefore, despite the current string of low injections, six and counting, total underground stocks are still at a comfortable 2.99 Tcf or 7.9% above the five-year.
Thus, analysts at The Schork Reportcan easily reconcile why next winter is trading below next summer… but why is October losing ground to November?
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.