<p>Last month we indicated that the key question facing the natural gas market is centered on the relationship between supply and demand. With NYMEX prices for the summer hovering between $2.50 and $2.70 per MMBtu, by how much will supply exceed demand? More to the point, where will inventory levels be by the end of the summer? While it&rsquo;s still early in the injection season, the data from the U.S. Energy Information Administration are encouraging from the perspective of a consumer of natural gas. Storage inventory gains have been out-pacing prior year levels and point toward an inventory level at the high end of the historic range by the end of the summer. High inventory levels tend to keep a lid on prices, so ultimately the outlook for the summer is positive for the natural gas buyer.</p>
<p>Throughout the winter, the varying temperatures introduce a bit of noise into the supply-demand relationship that sets natural gas prices. Cold can disrupt production and causes demand to spike. As the market moves into a seasonal lull in April and May, a clearer picture of summer fundamentals emerges leading to more reliable data for building projections through the end of the summer. As the chart shows, while there were some supply disruptions over the course of this winter, April has ever so slightly surpassed the peak production levels of 2014. Further, the momentum of strong supply growth throughout last year sets this summer up with an embarrassment of production riches which have been contributing directly to the strong storage injection gains the market has seen in April. For reference, April 2014 brought inventories up by 159 Bcf, and April 2015 is exceeding the prior year by roughly 60 percent, with injections coming in almost 100 Bcf higher. While it&rsquo;s early in the injection season, the combination of a more comfortable starting inventory level and stronger production bode well for the prospect of high storage levels by the end of the summer and a good buffer for offsetting next winter&rsquo;s demand.</p>
<p>&nbsp;</p>
<table border="0" cellspacing="0" cellpadding="0" width="623">
<colgroup><col width="139"></col> <col width="144"></col> <col width="152"></col> <col width="140"></col> <col width="48"></col> </colgroup> 
<tbody>
<tr height="20">
<td width="139" height="20">LOCATION</td>
<td class="xl65" width="144" align="right">28-Apr-15</td>
<td class="xl65" width="152" align="right">27-Feb-15</td>
<td class="xl65" width="140" align="right">29-Apr-14</td>
<td width="48">&nbsp;</td>
</tr>
<tr height="20">
<td height="20">NYMEX</td>
<td align="right">2.52</td>
<td align="right">2.73</td>
<td align="right">4.83</td>
<td>&nbsp;</td>
</tr>
<tr height="20">
<td height="20">NNG Ventura</td>
<td align="right">2.41</td>
<td align="right">3.88</td>
<td align="right">4.75</td>
<td>&nbsp;</td>
</tr>
<tr height="20">
<td height="20">Calif. Citygate</td>
<td align="right">2.59</td>
<td align="right">2.99</td>
<td align="right">5.00</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
<p>&nbsp;</p>
<p>&nbsp;</p>

2015/04/natural-gas-june_14303180778375_largethumb.jpg

2015/04/natural-gas-june_14303180778375_thumb.jpg

2015/04/natural-gas-june_14303180778375.jpg

With NYMEX prices for the summer hovering between $2.50 and $2.70 per MMBtu, by how much will supply exceed demand? More to the point, where will inventory levels be by the end of the summer? 

Commodities: Natural gas price outlook positive for consumer

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