The US Natural Gas industry has a challenge – refill working gas in storage to pre-winter levels by the first week of November. That’s no small order.
Let’s take a look at the US Lower 48 working gas in storage since 2004. All volumes are in Bcf.
The 2013-14 winter left the lower 48 working gas in storage levels extremely depleted versus the ten year history. The challenge currently facing the US Natural Gas industry … inject into storage 2,800 Bcf prior to the start of the 2014-15 winter. The following chart presents the ‘Net Build’ challenge for the summer and fall of 2014. All volumes are in Bcf, 2014 represents forecast data.
Take note here … amidst the incredible production gains brought about through fracturing of shale reserves, the industry will be challenged to adequately refill working gas in storage. US Natural Gas prices should now be considered ‘supported by fundamentals’.
NatGas futures (symbol: NG) exhibited classic price action with a swift pullback from the $6.493/MMBtu level achieved 24Feb14 . The pullback, although violent from a price perspective, occurred with decreasing volume, suggesting the move is corrective in nature. Momentum indicators will require some time to work off the overbought condition.
Support lies at the $3.95 and 3.12 levels. Lots of resistance between $6.50 and 8.21 range. Prices are supported by fundamentals. Any threat to production (hurricane season, raw material supplies, labor shortage) and transportation (pipeline disruption) will result in bullish price action. The market is moving into ‘buy dip’ mode.
Murphy & Co’s Natural Gas model is currently flat, holding no position. To learn more about Murphy & Co’s position models, visit http://murphycofutures.com/position-models/.