The EnergyWire Update 10.19.2017
Monday, Mexican officials announced that they had completed their 2018 oil hedge program - guaranteeing a floor price of $46/bbl (Reuters). This is the largest oil hedge on record.
This week the EIA forecast that US shale oil output would grow in November for the 11th straight month - output is set to rise by 82,000 bpd to 6.12 mln bpd (Reuters)
Monday the EIA forecast that US NG output from shale would rise in Nov to a record 60,9 bcf -up 0,8 bcf from Oct --this would be the 8th straight monthly increase (Reuters)
The EIA released its weekly natural gas storage build today, reporting a 51bcf increase in natural gas storage for the week ending October 13th. This puts the storage deficit to -4.7% vs. last year and -1% versus the 5 year average. End of injection season is forecast to be the lowest Pre-Winter total since 2014. (EIA)
For the third straight year, natural gas prices have consolidated at the $3 pivot point prior to the impending winter. Continued improvement in natural gas production may provide resistance, but prices could break to the upside on the first signs of cold weather given lower storage inventories this year. (Constellation New Energy)
In the short-term, forecasts indicate a cold shot for the balance of October, but Arctic Oscillation indicates the cold air will be short-lived. With Natural Gas production nearing record levels, the short-term market sentiment is bearish. However, recent market movement has ignored fundamentals.
In the long-term, production growth and pipeline expansion are ongoing with LNG exports and Winter forecasts pointing toward increases in natural gas demand.
NYMEX forward strips remain favorable, with 2020-2022 within 5% of their all-time lows. Both power and natural gas forward curves continue their backwardation.