Thursday, January 21, 2010

Natural Gas and Oil: U.S. Natural Gas Supplies Going into Historical Deficit on “Domestic Demand”

January 21, 2010


For public interest, senior energy executive and institutional investor Karl W. Miller released the following statement regarding Oil and Natural Gas today, through his advisors regarding the historical natural gas storage deficit in the U.S.

On January 7, 2010, Mr. Miller made the call and warned the market that the U.S. natural gas storage supplies were poised to flip from surplus to historical deficit during next 30 Days. For reference see Mr. Miller’s analysis: http://seekingalpha.com/instablog/522236-karl-w-miller/42591-natural-gas-storage-poised-to-flip-from-surplus-to-historical-deficit-during-next-30-days

Mr. Miller notes this has nothing to do with China, hedge funds, Washington politics, or any other excuse market prognosticators could put on the table. This is good old fashioned U.S. domestic demand and usage, which should provide substantial support to U.S. natural gas production companies. Let’s review the facts.

Working gas in storage was 2,607 Bcf as of Friday, January 15, 2010, according to EIA estimates. This represents a net decline of 245 Bcf from the previous week. Stocks were 22 Bcf higher than last year at this time and 6 Bcf below the 5-year average of 2,613 Bcf. In the East Region, stocks were 56 Bcf below the 5-year average following net withdrawals of 131 Bcf.

Stocks in the Producing Region were 5 Bcf below the 5-year average of 815 Bcf after a net withdrawal of 96 Bcf. Stocks in the West Region were 55 Bcf above the 5-year average after a net drawdown of 18 Bcf. At 2,607 Bcf, total working gas is within the 5-year historical range.

Mr. Miller can say with relative certainty that the natural gas in storage has now flipped to a historical deficit by much larger numbers than reported by the EIA today. We will see this deficit formally reported next Thursday, January 28, 2010, even with the current discrepancies in the EIA reporting methodology, which Mr. Miller has opined understates actual withdrawals of natural gas from storage across the U.S.

Thus, going into the final week of January, we have quickly moved from what many market analysts have touted for months was a massive excess of natural gas production and supply in storage, to a deficit, with demand projected to grow substantially in February and March due to extreme winter weather forecasted for the Eastern U.S. For reference see Mr. Miller’s article “Weather Update: Cold February and March in the Eastern US”: http://seekingalpha.com/instablog/522236-karl-w-miller/44883-weather-update-cold-february-and-march-in-the-eastern-us

Also, Mr. Miller suggest everyone, especially energy traders remember that there is a Western region of the U.S. (often overlooked), and that region consumes a large amount of natural gas both in winter and summer, so it’s not all about the Eastern U.S., as we found today with a natural gas withdrawal of 245 billion cubic feet of gas withdrawn from storage according to the EIA.

Mr. Miller does not provide answers, only information and facts, which clearly indicate that we are consuming massive amounts of natural gas in the U.S. right now and are projected to continue doing so for the next 60 days which would leaving a massive deficit in natural gas in storage, going into the spring and peak summer seasons. For further reference see Mr. Miller’s analysis “Why the U.S. Natural Gas Industry is NOT in a State of Permanent Excess Supply”: http://www.investorideas.com/news/123009a.asp

These are powerful facts and circumstances for all investors to consider, we as the U.S. is burning through a lot of natural gas very quickly and demand is slated to grow much higher going forward. Investors considering a shelter from the market storm might do well to consider natural gas production companies. For further reference see Mr. Miller’s analysis “Oil and Natural Gas: A Hedge from the Doom and Gloom Prognosticators and Rose Colored Glasses”: http://seekingalpha.com/instablog/522236-karl-w-miller/44463-oil-and-natural-gas-a-hedge-from-the-doom-and-gloom-prognosticators-and-rose-colored-glasses

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