Storage should be well below 2000 bcf by the middle of March
Working gas in storage was 2,996 Bcf as of Friday, January 18, 2013, according to EIA estimates.
-- This represents a net decline of 172 Bcf from the previous week.
-- Stocks were 157 Bcf less than last year at this time and
-- Stocks were 320 Bcf above the 5-year average of 2,676 Bcf.
At 2,996 Bcf, total working gas is within the 5-year historical range.
Hmm! The next two reports should show declines well over 200, maybe even closer to 250.
-- the period ending 1/25 should have 5 days of frigid weather
-- the period ending 2/1 should have at least 3 days of frigid weather
Note: Two weeks ago we had a drawdown of 201 when we had normal winter temps. So, 250 is not unreasonable for 5 days of frigid weather.
So, in a couple of weeks we will be around 2,500 bcf with another 6-7 weeks where can expect to have drawdown. The same two weeks last year we had a drawdown of 132 and 78 for a total of 210. (3098 to 2888). So, we should be at or below the 5 year average in a couple of weeks.
Last year the low point was at 2369 for the week ending 3/9/2012.
I am beginning to think that people are not factoring this in at all, as we saw Natural Gas prices go down today.
Even if we have above average temperatures for the remaining 6-7 weeks after the next two reports, we should finish well below 2000, maybe closer to 1800. Which should be below the 5-year averages and well below the 2369 of last year.
Maybe we should be closer to $4 by the end of the winter season?
We would have to get down to below 1.6tcf storage to equal the average figures from 2008 thru 2011, which is highly unlikely IMHO. You may be right that we hit 2.0 tcf by end of withdrawal season. The injection season may prove to be even more important than the withdrawal season: Here is how I see it:
Lets look into the withdrawal figures first. The withdrawal figures for 2011 were pretty much in line with the 5 year averages, here is how they worked out from where we are now forward.
Jan 28, 2011 -189
Feb 04, 2011 -209
Feb 11, 2011 -233
Feb 18, 2011 -81
Feb 25, 2011 -85
Mar 04, 2011 -71
Mar 11, 2011 -56
Mar 18, 2011 -4
Total 928 bcf draw in 2011 for the remainder of the withdraw season and once again pretty much in line with the 5 year average. Next week the draw should be well above the 2011 figure, the following week probably in line to perhaps slightly below. It will be tough to hit that Feb 11 figure. I figure a further decline of 900 bcf should be attainable by end of the withdrawal season, putting us at around 2.1 tcf in storage well below the 2012 figure of 2,369. In 2011 it finished the season with 1.612 tcf in storage, which was pretty much in line with the 5 year averages.
But here is where it gets really interesting, the 2012 injection season was far lower than any of the past 5 years. Lets start at the beginning (lowest level of storage at the end of the withdraw season) and end when it peaks.
March 09, 2012 2.369tcf to Nov 02, 2012 of 3.929 tcf or a difference of 1.560 tcf
March 18, 2011 of 1.612tcf to Nov 18, 2011 of 3.852 tcf or a difference of 2.240 tcf
March 12, 2010 1.615 tcf to Nov 05, 2010 3.840 tcf or a difference of 2.225 tcf
March 13, 2009 1.651 tcf to Nov 27, 2009 3.837 tcf or a difference of 2.186 tcf
April 04, 2008 1.234 tcf to Nov 14, 2008 3.488 tcf or a difference of 2.254 tcf
So from 2008 to 2011 we saw on average an injection of 2.226 tcf, then it radically reversed itself in 2012 to only 1.560 tcf or a difference of 666bcf. If we see the same pattern this year, peak storage will be 2.1 tcf + 1.560 tcf or 3.660 tcf leading into next winter. This would put us well below the 5 year average of 3.789 tcf and should lead to higher prices. If we start to see a decline in production, things could really get out of control.
Your analysis is well done, and coupled with production cutbacks starts to look mildly bullish. What really makes natural gas look constructive is the demand side of the equation. Low energy costs are luring manufacturing back to this country - not only U.S. companies like Dow Chemical, but Europran and Asian companies as well. Low prices take care of low prices. This is an excellent area to build/add to positions.
Inventory should be well below 2 TCF by mid-March. By the end of January, we'll be btw 2.6 and 2.7 TCF. Assuming another 5 weeks of winter (through first week of March), you can subtract another .8-1 TCF if this weather holds up. Gets us below 2 TCF and maybe down to 1.6-1.7 TCF. That would surprise the market. With only 400 rigs, you'll be playing catch-up all year.
February weather could be much colder than expected. The inventory at the end of winter should be below the 5 year average. The depletion of wells and reduced drilling will make for an interesting supply/demand balance mid-2013.