US Natural Gas may remain firm below $4 per mmBtu for near term

us-netural gasUS natural gas prices are expected to trade with upward bias for near term as a result of cold weather and forecasts for lower than normal weather. However, higher production is expected limit gains in commodity prices below $4 per mmBtu for near term except any significant output freeze-offs or extremely cold weather, said London based Barclays in its latest weekly report.

In November, unseasonably cold weather forecasts have pushed natural gas prices up. The prompt contract settled higher at $3.95 per mmBtu on Friday, last week on NYMEX.

“The EIA-914 reports for September natural gas production is due to come out next Thursday. We expect the report to show a decline in production in September, as pipeline flow data estimated a loss of more than 400 MMcf/d of supply m/m. This is largely due to the fact that September featured numerous disruptions: widespread pipeline and well maintenance, floods in Colorado which shut down wells, and incidents at processing plants in the Northeast which curtailed production. The production drop in September is expected to reverse, however, in October and November,” Barclays pointed.

In November, especially, pipeline flow estimates have indicated a large m/m growth of 1.5 Bcf/d, largely due to infrastructure additions in the constrained Marcellus and the Utica shale plays. As much as 1.9 Bcf/d of pipeline additions came online in the Marcellus in November.

“For the rest of the winter, we expect production growth in the country to persist barring any significant well freeze-offs in the West and the Gulf regions. Additional infrastructure additions in the Northeast, continued growth of associated gas and slowing declines at existing wells indicate that production growth next year should accelerate from this year’s rates,” Barclays noted.

There was a decline in the natural gas stock-piles as per the earlier estimates. US working gas in storage were 3,776 Bcf as of Friday, November 22, 2013, according to the latest weekly report from Energy Information Administration (EIA). This represents a net decline of 13 Bcf from the previous week. Stocks were 100 Bcf less than last year at this time and 17 Bcf above the 5-year average of 3,759 Bcf.

In the East Region, stocks were 114 Bcf below the 5-year average following net withdrawals of 14 Bcf. Stocks in the Producing Region were 98 Bcf above the 5-year average of 1,193 Bcf after a net injection of 7 Bcf. Stocks in the West Region were 33 Bcf above the 5-year average after a net drawdown of 6 Bcf. At 3,776 Bcf, total working gas is within the 5-year historical range.

[Source: Barclays]

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