Natural gas' big miss

A Big Miss!

Nat Gas (NYMEX:HHK14) had a big miss on its storage injection raising fears about U.S. storage levels going into next winter which should start to send chills into the market place. The Energy Information Administration reported that working gas in storage was 850 Bcf as of Friday, April 11, 2014. This was a net increase of 24 Bcf from the previous week far short of the 53 expected. Stocks were a whopping 850 Bcf less than last year at this time and 1,010 Bcf which is 54.3% below the 5-year average of 1,860 Bcf. In the East Region, stocks were 460 Bcf below the 5-year average following net injections of 6 Bcf. Stocks in the Producing Region were 418 Bcf below the 5-year average of 789 Bcf after a net injection of 10 Bcf. Stocks in the West Region were 132 Bcf below the 5-year average after a net addition of 8 Bcf. At 850 Bcf, total working gas is below the 5-year historical range.

The report seemed to suggest that the expectation that storage would be refilled quickly have to be questioned. With most producers saying they are going to cut production as opposed to increasing production is signaling that prices must rise to encourage a change of heart. We believe that this market could be explosive especially if we have a hot summer of an active hurricane season, so make sure you have some exposure to this market.

Oil prices (NYMEX:CLK14) have been high as Ukraine worries still seem to be supporting prices. The seasonal switch to summer blends of gas also is keeping prices high.

High oil prices may be thwarting Japan. The AFP reported that Japan's trade deficit quadrupled on-year in March to US$14bil, data showed Monday, with a weak yen compounding surging imports as consumers rushed to buy ahead of a rise in sales tax. Japan imported 1.45 trillion yen (US$14bil) worth of goods more than it exported in the month, the finance ministry said, compared with a shortfall of 356.9 billion yen in March 2013. Exports rose 1.8% to 6.38 trillion yen, thanks to higher shipments of cars and processed fuel products. But imports grew a much faster 18.1% to 7.83 trillion yen due to higher imports of crude oil and liquefied natural gas as resource-poor Japan raced to plug its energy gap. For the fiscal year to March, Japan logged a record largest trade deficit of 13.75 trillion yen. A 17.3% rise in imports from a year earlier to 84.61 trillion yen caused by post-Fukushima energy bills overwhelmed a 10.8% jump in exports to 70.86 trillion yen, according to data issued by the finance minister

Oil prices are stubbornly high and so are retail gasoline prices. The average price for regular gasoline hit a 13 month high jumping 8.5 cents in the past two weeks to high of $3.6918 a gallon, according to my buddy Trilby Lundberg.

Trilby told Bloomberg News that the highest price for gasoline in the lower 48 U.S. states among the markets surveyed was in Los Angeles, at $4.26 a gallon, Lundberg said. The lowest price was in Salt Lake City, where customers paid an average $3.29 a gallon. Regular gasoline averaged $3.80 a gallon on Long Island, N.Y. An "extremely robust" rise in U.S. gasoline demand may have also helped increase retail prices, according to Lundberg. Demand for the motor-fuel in the last four weeks is up 4.6 percent from the same period a year ago, Energy Information Administration data show.

Gasoline futures for May delivery on the New York Mercantile Exchange rose 12.34 cents, or 4.2 percent, to $3.0547 a gallon in the two weeks ended Thursday. Trading was closed April 18 for Good Friday. Inventories of the motor fuel fell 154,000 barrels in the week ended April 11 to 210.3 million, the lowest since Nov. 15, according to Energy Information Administration data. Supplies were down 9.9 percent in eight weeks of contractions as refiners performed seasonal maintenance and sold off stocks of winter- grade gasoline.

Of course do you think that President Obama will get the blame? The President continues to delay a decision on the Keystone Pipeline. The President continues to delay the decision for political purposes alienated even some of his Democratic base. The house Energy and Commerce Committee Chairman Fred Upton (R-MI) said that "Once again, in this so-called 'year of action,' the Obama administration has hit the pause button on jobs and affordable energy. All Keystone XL requires is a simple 'yes' or 'no,' but after over 2000 days, the administration is still incapable of making a decision, putting politics ahead of jobs--not exactly a profile in courage. "By the day, international developments and unrest, from Ukraine to Nigeria to Venezuela, are putting the spotlight on energy security and the need for a stable North American energy supply. And rising energy prices here at home are putting a strain on household budgets, particularly for the countries most vulnerable. Now more than ever, we are in desperate need of leadership and conviction. Punting on this decision is not the solution America wants or needs.

"The facts are clear that Keystone XL is in the national interest, but this administration is going to extraordinary lengths to block the landmark project. A 'yes' on Keystone is long overdue. The House has done its part in passing legislation to approve this jobs and energy project. Now that the administration has put this project on hold indefinitely, the Senate must act to approve Keystone now."

Pig Out! It is time to find out how many pigs are dying. Dow Jones reports that the U.S. Department of Agriculture said Friday that it would try to combat a fast-spreading swine virus by requiring the pork industry to report and track all incidents of the disease. The USDA said the measures could help slow porcine epidemic diarrhea virus, which has afflicted hog farms in 29 states and killed millions of young pigs since it was first identified in the U.S. last spring. Fatal only to piglets, the virus poses no threat to human health or food safety, according to scientists--though it has contributed to higher U.S. pork prices. The virus isn't yet on a list of diseases that must be reported to regulators under international standards aimed at coordinating disease control. The Paris-based World Organization for Animal Health sets those standards, requiring its 178 member nations to report diseases shown to cause significant mortality in wild or domestic animals.

 

 

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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