Natural Gas Supply and Demand A Delicate Balancing Act Jack Weixel VP Analysis
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What more can we possibly talk about? Lower 48 Balance how did we get here? Demand Expectations and Review of Panel Forecasts Supply Stagnations, Accelerations and Panel Forecast Lower 48 Balance where do we go from here?
2015 Summer td vs. 2014 Summer td Supply Demand Dry Prod 3.2 LNG Can Imports Supply 3.7 Power 4.1 Industrial Res/Com Mex Ex Demand 4.8 0.5 0.1 1.0 0.0-0.4 Season to date: 1.2 Bcf/d Short Versus Summer 14 to date Was 3.1 Bcf/d Long on May 22 nd Was 1.1 Bcf/d Long on June 12 th Source: PointLogic Energy Supply & Demand Report
Power and Mexico Pushing the Envelope Power up 4.1 Bcf/d Summer TD, Mexico up 1.0 Bcf/d Total Demand up 4.8 Bcf/d Versus Summer 2012 TD, Total Demand Up 3.3 Bcf/d Week on Week Power Burn Delta Summer 15 Versus Summer 14 (Bcf/d) 6.7 7.4 8.0 6.9 6.2 5.4 5.7 4.54.4 4.0 4.5 4.9 3.3 3.4 3.3 2.7 3.1 0.6 Week on Week Mexican Exports Delta Summer 15 Versus Summer 14 (Bcf/d) 0.8 1.0 1.1 0.9 1.1 1.1 1.2 1.1 1.1 1.0 1.0 0.8 0.8 0.9 0.7 0.3
Demand to date for Summer 2015 82.5 80.0 77.5 75.0 72.5 70.0 67.5 65.0 62.5 60.0 57.5 55.0 52.5 50.0 Total Demand - Summers in Bcf/d No reason for demand to dip going into late shoulder season as Mexico persists and price is suitable for power generators. 3-Year Range 3-Year Average 2015 Extrap. Forecast
2015 Summer Forecast vs. 2014 Summer Supply Demand Dry Prod LNG Can Imports Supply Power Industrial Res/Com Mex Ex Demand 3.3 3.5 3.4 4.5 0.3 0.0 0.0 1.1-0.1 Summer 15 Season Base Forecast: 1.0 Bcf/d Short Versus Summer 14 Equates to 214 Bcf less gas available to inject into storage 7.1 Bcf per week lower injection over 30 weeks of summer Source: PointLogic Energy Supply & Demand Report
Demand Impact on Storage 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 Storage Inventory (Bcf) Upper Bound: 4.2 Tcf 2014 Injection Rate Lower Bound: 3.0 Tcf 5 Yr. Minimum 3.98 Tcf 5 Year Range 2015 2015 Demand Forecast
Expectations for Winter 2015/2016 Demand Delta to Winter 14/15 (Bcf/d) Power 0.0 Industrial 1.2 Res/Comm Mex Ex 1.0 LNG = Total Demand 0.2 0.3-2.0 0.6 Bcf/d Capacity at Sabine Train 1 starting in Dec/Jan. Actual commercial deliveries to start in April 16. Source: EIA and PointLogic Energy
Expectations for Winter 2015/2016 Demand What do these two temperature outlooks have in common?
Expectations for Winter 2015/2016 Demand Up 1.5 Bcf/d vs. EIA STEO Power 1.6 PointLogic Estimates -- Delta to Winter 14/15 (Bcf/d) Pace of Industrial Gains Slower than Anticipated Industrial 0.5 Weather is a Marginal Player Winter 15/16 Res/Comm Mex Ex 1.0 LNG 0.2 = Total Demand 1.2-2.0 0.6 Bcf/d Capacity at Sabine Train 1 starting in Dec/Jan. Actual commercial deliveries to start in April 16. Source: EIA and PointLogic Energy
Panel Forecasts for Demand 88.0 87.5 87.0 86.5 86.0 85.5 85.0 Total Domestic Demand Plus Mexico and LNG Exports (Bcf/d) EIA Winter 14/15 Actual PointLogic BTU Analytics Bentek - Weather Normalized SNL Energy* *Derived value with permission, not an official SNL Forecast
What s Going On Production? Lower 48 Dry Production (Bcf/d) 78.0 76.5 75.0 73.5 72.0 70.5 69.0 67.5 66.0 64.5 63.0 Production stagnation waning Aug up 1.6 Bcf/d compared to Jan But, production grew 4.5 Bcf/d from Jan to Aug 2014 2015 2014
Production Forecast Winter 2016 76.0 74.0 72.0 70.0 68.0 66.0 64.0 62.0 Dry Production Forecast through Winter 2016 (Bcf/d) 73.8 74.6 Actual Forecast Prod
Panel Forecasts for Production Dry Production (Bcf/d) 75.00 74.50 74.00 73.50 73.00 72.50 72.00 71.50 EIA Winter 14/15 Actual PointLogic BTU Analytics Bentek Energy SNL Energy
Winter 2015/16 vs. Winter 2014/15 Supply Demand Dry Prod LNG Can Imports Supply Power Industrial Res/Com Mex Ex LNG Ex Demand 1.8 0.0 0.0 1.8 1.6 0.5 1.0 0.2 1.2-2.0 Winter 15/16 Forecast Market could be 0.6 Bcf/d Long versus Winter 2014/15. This equates to 89 Bcf less gas withdrawn over course of season. Source: PointLogic Energy Supply & Demand Report
Supply and Demand Impact on Storage 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 Storage Inventory (Bcf) Lower Bound: 0.8 Tcf 5 Yr. Minimum Upper Bound: 2.5 Tcf 5 Yr. Maximum 1.94 Tcf or 1.89 Tcf Weather Norm or 1.85 Tcf Minimum 5 Year Range 2015 2015 Demand Forecast 2016 Forecast 2016 Weather Norm
Storage Inventory Impact on Price 3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50 Oct-15 2.693 Feb-16 3.025 Apr-16 2.854 Jun-16 2.882 Oct-16 2.949 November Can Still Dip Lower as Lower 48 Storage Approaches Historical Fill Record. Upward Pressure Going into Jan and Feb as Power and Mexican Export Demand Persist, and LNG Exports Arrive on Scene. Downward Pressure into Summer 16 as demand struggles to keep up.
Key Takeaways Despite Market Going Short Over the Course of Summer, Rapid Fill to Storage Expected. Winter Demand Expected to Increase Season on Season. Winter Production Flat to Decreasing Season on Season. Impact on Storage Inventories is Negligible Within Range Expected. Systemic Increase in Demand Led By Mexican Exports Could Lead to Pop in Prices this Winter.
Contact Us Today! Jack Weixel Vice President, Analysis 202.607.6354 jweixel@pointlogicenergy.com Customer Support Phone: 855.650.4500 ext. 1 support@pointlogicenergy.com Gaithersburg HQ: 9737 Washingtonian Blvd. Sales Phone: 855.650.4500 ext. 2 sales@pointlogicenergy.com Houston Office: 1155 Dairy Ashford Rd.