Ponderosa Energy’s Weekly Market Bulletin

  • Natural gas is likely to continue to trade this week at the lowest levels since 1999. Forecasts call for a “blowtorch” weather pattern across the eastern US, which could bring the warmest Christmas Day temperatures on record to much of the Midwest, Southeast and East Coast. About 2,000 high-temperature records have been set in the Lower 48 through the first two weeks of December.
  • Early projections for Thursday’s EIA gas storage report are calling for another low weekly natural gas storage draw, potentially below 20 Bcf, which compares to a 51-Bcf draw in 2014 and a 5-year average withdrawal of 122 Bcf for the week.
  • Crude oil last week traded at its lowest levels since December 2008 after a 4.8-MMbbl commercial crude inventory build. The Fed’s interest-rate hike also pressured prices. Ponderosa expects another crude inventory build this week; U.S. production is slightly declining but imports, which rose to 8.3 MMb/d this month,  are more than filling the gap. Wednesday’s storage announcement will be closely watched as another inventory build could send prices toward $30/bbl.
  • The government’s decision to lift the ban on U.S. exports of crude will have little short-term impact on prices, as actual exports are likely months away for three key reasons: The Brent/WTI spread has collapsed (with the contracts less than a dollar apart at the end of trading last week, limiting arbitrage opportunities); the crack spread has collapsed (distillate/gasoline spreads have tightened on weak distillate demand); and U.S. infrastructure to facilitate exports must be built.
  • NGL prices remain at their lowest levels since EIA began tracking prices in 2009. Propane, which like natural gas usually moves higher during winter, continues to be pressured by oversupply and lack of heating demand. U.S. wholesale prices have averaged 39.13 cents/gallon this December, compared to 55.71 cents/gallon for December 2014. Expect continued pressure due to forecasts of warmer weather for the holiday week.To subscribe to our weekly Market Bulletin, delivered via email each Monday morning at 7 a.m. Eastern time, please email MarketBulletin@ponderosa-advisors.com