From: research
Sent: Sunday, April 05, 2020 9:34:07 AM (UTC-06:00) Central Time (US & Canada)
To: research
Subject: Weekend Market Report – April 5, 2020

The most pressing news in the energy markets this weekend is whether the oil price war will come to an end this week. It seems that we might be near, as Trump tried to broker an agreement between Saudi Arabia and Russia last week which led to Saudi calling an emergency OPEC meeting. Putin might be ready give in as Russia’s economy is in free fall with lower prices, a sharp fall in global demand for petroleum products, and domestic issues related to the COVID virus.


The emergency OPEC+ meeting was set for Monday, but has been postponed until April 9th. The meeting will be held via video conference and will include oil producers from outside the OPEC+ alliance. Both Saudi Arabia and Russia would like to get the United States, Canada and other to join in emergency cuts aimed at halting the crash in oil prices.


The oil price crash has spooked US producers and regulators into considering monitoring output for the first time in nearly 50 years. Canada and Norway have also indicated they would be willing to join any potential global pact.


Oil prices started the week off at multi-decade lows, but rose after Trump announced his involvement. Natural gas was on a bearish trend throughout the week, but followed oils lead on Friday.





In the natural gas world, we have officially exited winter 19/20. Most would argue that this winter was over back in late-January when no real weather showed up.


Today we’ll go through the supply and demand for this winter. We received the latest January data from EIA earlier this week, and now have good view on how this winter ended. The latest EIA storage report for week ending Mar 27th pointed to a storage level of 1986. The total seasonal draw was 1735 Bcf, or the 3rd smallest draw in the past 10 years. Only Winter 11/12 and Winter 15/16 had smaller draws over the enter season.


The table below helps us analyze how this winter balanced in a lot more detail. The gray areas are actuals from the EIA, while the data for Feb/Mar are modelled/approximates to fit the end of season reported in the latest EIA report.



Production: US dry natural gas production started the winter at the highest level on record. In late November, the L48 natural gas production hit its all-time high of almost 97 Bcf/d. The average daily production for the winter was 94.6 Bcf, or +5.4 Bcf/d YoY. The dropping prices throughout winter caught up to producers, and we observed US production continuously drop throughout the winter. We estimate March production at 92.8 Bcf/d.



Power Demand: Lower prices this winter led to growing power demand. Average power demand was 28.9 Bcf/d, or 2.8 Bcf/d higher YoY. In December we observed the higher YoY growth in demand as prices were $2.33/MMBtu lower than the previous year.



ResComm Demand: After a cold start to winter, there was no real winter past January. Total ResComm demand averaged 36.7 Bcf/d, or 3.8 Bcf/d lower than last year. RC weighted temps averaged 1.3F warmer than last year, but Q1 was extremely warm. On average, we recorded temps being 7.8F warmer than last year during Q1.


Industrial Demand: The low gas price since the onset of shale production has led to an increase in industrial demand, but weather does play a role in how much gas is utilized at these facilities in the winter. Total Industrial demand averaged 24.5 Bcf/d, or -0.4 Bcf/d lower than last year.



Mexican Exports: Lower domestic Mexican production, growing Mexican demand, and more border pipeline has led to growing pipeline exports to Mexico. Average Mexican pipeline exports via pipeline was 5.2 Bcf/d, or 0.4 Bcf/d higher YoY. Exports to Mexico peak in the summer, as all their demand is associated with power burns.


LNG Demand: With a number of new LNG facilities coming online in the last 12 months, the total gas exported has increased substantially. Total gas exported averaged 7.2 Bcf/d, or +3.6 Bcf/d YoY. Keep in mind, this number does not include the fuel used at the facility. The natural gas used at the facility is captured in Other Demand from the Lease and Plant Fuel category. We estimate that 15-20% of the total gas delivered is utilized at the plant.



Fundamentals for week ending Mar 27: Our early view for the upcoming storage report is a +33 Bcf draw for the lower 48. This is the first draw of the season, which will take storage levels back above 2 Tcf.

US natural gas dry production is slightly lower week-on-week with domestic production averaging 91.8 Bcf/d for the week. The week started off with lower production levels , but nomination was restated to bring it higher. We expect the pipeline nomination data to be restated further this week to get production back towards 92 Bcf/d.

Natural gas demand moved lower last week with warmer temps starting to creep in in major demand regions. The warmer temps resulted in 8.4 Bcf/d of less gas consumption.  Residential and commercial sector demand dropped by 5.3 Bcf/d WoW, while power dropped by 1.3 Bcf/d WoW.

Canadian imports were also lower last week averaging 3.8 Bcf/d.

Mexican exports stayed flat to average 5.6 Bcf/d.

Deliveries to LNG facilities increased week-on-week with Sabine resuming normal operations. Total LNG deliveries were 9.4 Bcf/d.

Expiration and rolls: UNG ETF roll starts on Apr 14th and ends on Apr 17th.

May futures expire on Apr 28th, and May options expire on Apr 27th.

Het Shah
Bloomberg IM: Het Shah
enelyst DM:
Tel: 917-975-2960

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