When United States natural gas 2014 build season ends this autumn, assuming normal weather and moderate US economic growth, working gas inventories in the key Producing Region probably will be between 1030bcf/1056bcf and 1170bcf. Suppose US gas output over the next several months significantly exceeds the Energy Information Administration’s May 2014 forecast (as some natural gas clairvoyants claim it will). Then inventories may ascend from the EIA’s current estimate of over 1020bcf to around 1170bcf. Based upon historic inventory patterns, especially those of 2006 to the present, most marketplace participants probably view around 1173bcf as average Producing Region inventory for the end of build season. Historical analysis indicates that a move to around 1232bcf, though unlikely, should not be discounted. In any event, the Producing Region probably will not face containment problems this year.
The NYMEX natural gas marketplace during the course of build season probably will remain in a sideways trend, with the range being 3.80/4.00 to 5.00/5.20 (nearest futures continuation). The spring 2013 top (5/1/13 at 4.444) represents a midpoint to monitor. Despite the bearish price drop since late February 2014, the current Producing Region and overall US inventory picture for the balance of build season still appears quite bullish. What happens if as build season marches onward, actual overall US inventories look unable to increase significantly relative to the EIA’s May 2014 prediction for end build season 2014? Then a breakout above 5.00/5.20 resistance is probable. Suppose Producing Region inventory looked headed toward around 1230bcf, and that a comparable large percentage inventory gain also appeared likely in the Eastern and Western regions. Then a price move toward 3.40 may occur.
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US Natural Gas Inventory Building- the Producing Region Picture (5-18-14)
Charts- NYMEX natural gas and coal (5-18-14, for essay US Natural Gas Inventory Building- the Producing Region Picture)