RBC Capital
The Energy Information Administration (EIA) reported its weekly gas storage survey.
Investment Opinion
EIA Weekly Storage Report. The EIA reported a net withdrawal of 5 Bcf, weaker than our withdrawal estimate of 19 Bcf and the Bloomberg consensus of 28 Bcf. The same-week average withdrawal was 41 Bcf. The EIA revised its storage inventory for the week of November 19, to reflect a resubmission of data from one or more respondents. Thus, the withdrawal of 49 Bcf reported last week should have been a withdrawal of only 17 Bcf, which would have been inline the market expectation of 15 Bcf.
Natural Gas Outlook. As of this writing, the natural gas commodity is down over 7%, we think a combination of this week's weaker-than-expected withdrawal and the magnitude of the upward revision likely surprised the market. The direction of natural gas prices will be influenced largely by the near-term weather outlook which, is not supportive of the current futures prices. We think current gas prices futures reflect, in addition to crude oil and products prices, the market's anticipation for a colder-than-average winter (the consensus view among meteorologists). The early part of the winter has been mild and NOAA considers an El Niño weather pattern a likely event this winter. El Niño events generally coincide with warmer-than average winters. Unless we see a sustained period of below-normal temperatures, we would expect gas prices to continue to decline from current levels.
Gas Storage Outlook. The reported withdrawal brings storage to 3,299 Bcf, 331 above normal. Based on our supply/demand model, we expect storage at the end of the heating season (i.e., around April 1) to be 1,243 Bcf, above the average of 1,020 Bcf. |
