Natural Gas Report

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Published Friday afternoon, 11/2/12
Natural Gas traded lower settling $3.554, down $0.145 (3.8%). The curve was weaker 13/17 $0.04 lower. Hub cash was much weaker, ~$0.25 back this morning, Z-6 down $0.10 to $3.60. The 12z was in line with overnight models during the 6-10 day (warming East, cooler West). The 11-15 was significantly warmer Midwest and Eastern U.S., above normal through the period. Yesterday the EIA reported an injection of 65 Bcf, slightly bullish vs market expectations. This brings inventories to 3.908 Tcf, 114 Bcf higher YoY and 266 Bcf above the 5-year average. Next week we estimate an injection ~25 Bcf, bullish against 2011’s 37 Bcf injection and the 5-yr average 38 Bcf injection. Chesapeake reported Q3 earnings today, CEO Aubrey Mcclendon said “2013 gas production is largely unhedged, awaiting further strengthing in gas prices.” He also noted that CHK natural gas production likely peaked in q3. Baker Hughes reported natural gas rig count rose 8 to 424.

 

The EIA 914 reported that in August, Lower 48 States production decreased 0.2 percent or 0.11 billion cubic feet per day (Bcf/d). The Gulf of Mexico and Louisiana had the largest decreases at 9.5 percent or 0.39 Bcf/d and 1.9 percent or 0.16 Bcf/d, respectively as many operators reported shut-ins due to Hurricane Isaac. Wyoming production also decreased 2.1 percent or 0.13 Bcf/d due to maintenance. Increases in production were reported in Texas and Other States at 1.0 percent or 0.23 Bcf/d and 1.6 percent or 0.37 Bcf/d respectively, which primarily can be explained by new wells coming on-line in several shale plays. Bentek estimated a decline of 0.7 Bcf/d vs a decline of 0.11 Bcf/d.  July production was revised higher by 0.09 Bcf/d.

 

 

Vol was firmer overall today: (Z12 355 25.50 27.00 36.94% 1.10% F13 370 40.50 42.00 36.04% 0.84% G13 370 51.00

52.50 35.77% 0.30% H13 365 57.00 59.00 35.41% 0.50% J13 365 60.00 62.00 33.48% 0.47% K13 370 64.50 66.50

32.22% 0.04% M13 370 69.50 71.50 31.85% 0.47% N13 375 74.00 76.00 31.41% 0.27% Q13 380 79.00 81.00 31.11% -

0.11% U13 380 84.50 86.50 31.45% -0.09% V13 380 90.50 92.50 32.17% 0.36% X13 395 91.50 93.50 29.84% -0.06% Z13 410 93.50 95.50 28.31% 0.42%). Technically we are bearish, looking for the continuation gap to be filled to $3.50. Resistance is found at $3.64, $3.75. On the downside we see support at $3.43, $3.36, $3.32, $3.23, $3.16.

 

Editor’s Note: Natural Gas Commentary readers who are equity investors/traders only can gain access to the Natural Gas space through the following exchange traded funds (ETFs).

Natural Gas

United States Natural Gas Fund (UNG, quote)

United States 12 Month Natural Gas Fund (UNL, quote)

First Trust ISE-Revere Natural Gas Index Fund (FCG, quote)

 

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