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Natural Gas Storage Forecast: Bearish Outlook, But EOS Storage Index Is Within Market Expectations

May 15, 2019  

TRADING POSITIONS

We have slightly reduced our short exposure earlier today, but we are not adding any new long positions (just yet). So far, the return on invested capital in May has been 4.70% in futures and 6.0% in ETNs (see the tables below).

THE WEATHER

Last week, the number of heating degree-days (HDDs) plunged 37%, as weather conditions warmed up across the country. However, heating demand was still up y-o-y. We estimate that total energy demand (as measured in total degree-days – TDDs) was approximately 11.0% above last year’s level.

This week, the weather conditions have cooled down again across Lower-48 states, but not substantially. A drop in cooling demand was especially pronounced in the Northeast and Southeast parts of the country. We estimate that the number of nationwide HDDs will rise by 14.0% w-o-w in the week ending May 17, while the number of nationwide cooling degree-days (CDDs) should edge down by about 2.0% w-o-w. We estimate that total average daily demand for natural gas for the week ending May 17 should be somewhere between 78 and 82 bcf/d, which is approximately 15.0% above 5-year average for this time of the year. Total energy demand (measured in TDDs) should be some 4.0% above last year’s level.

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