With contango situation shifting significantly higher on the week for calenders 2016, 2017 denotes fundamentals will be stronger during that time frame, according to a weekly report from Barclays. The natural gas prompt contract edged slightly higher by a penny as of May 1 compared to the previous week. Over the last week, the front of the curve has been partially supported by near-term production issues, especially the explosion that shut down the Opal processing plant in Wyoming. According to Bentek, before the explosion, flow from the processing plant was at 960 MMcf/d. As four of the five processing units with 1.1 Bcf/d of processing capacity out of the full 1.5 Bcf/d were unharmed, the plant should resume normal operation shortly. Indeed, according to pipeline flow data, receipts from the Opal processing plant rebounded to 147 MMcf/d as of May 1.

"We expect these temporary issues to be resolved shortly, while natural gas production growth should accelerate throughout the rest of the year compared to 2013."

For the week in reference, stocks rose by 82 Bcf, 6 Bcf above the consensus injection of 76 Bcf. This is the second week in a row that injections came above consensus expectations. The East injected 34 Bcf and the West added 13 Bcf. The producing region grew 35 Bcf. The storage deficit to last year’s level decreased 41 Bcf to 790 Bcf, while the storage deficit to the five-year average fell by 24 Bcf to 984 Bcf. We expect the storage deficit to last year’s
level to narrow further throughout the injection season, and for storage to end October at 3.4 Tcf, 400 Bcf below the year-ago level.

Meanwhile, gross withdrawals of natural gas in the Lower-48 increased 0.05 Bcf/d, to 75.37 Bcf/d, in February 2014, according to the latest EIA Monthly Natural Gas Gross Production Report. The reported production growth came in significantly less than pipeline flow estimates, which showed production growing almost 0.75 Bcf/d m/m in February. However, overall, pipeline data indicate that production is about 0.8 Bcf/d below November 2013 averages in February, while the EIA-914 data show that production is only about 0.6 Bcf/d below November averages. Pipeline data have poor visibility into intrastate pipeline
flows; therefore, estimates on production changes related to freeze-offs could exhibit.

For the week in reference, stocks rose by 82 Bcf, 6 Bcf above the consensus injection of 76 Bcf. This is the second week in a row that injections came above consensus expectations. The East injected 34 Bcf and the West added 13 Bcf. The producing region grew 35 Bcf. The storage deficit to last year’s level decreased 41 Bcf to 790 Bcf, while the storage deficit to the five-year average fell by 24 Bcf to 984 Bcf. We expect the storage deficit to last year’s
level to narrow further throughout the injection season, and for storage to end October at 3.4 Tcf, 400 Bcf below the year-ago level.

Meanwhile, gross withdrawals of natural gas in the Lower-48 increased 0.05 Bcf/d, to 75.37 Bcf/d, in February 2014, according to the latest EIA Monthly Natural Gas Gross Production Report. The reported production growth came in significantly less than pipeline flow estimates, which showed production growing almost 0.75 Bcf/d m/m in February. However, overall, pipeline data indicate that production is about 0.8 Bcf/d below November 2013 averages in February, while the EIA-914 data show that production is only about 0.6 Bcf/d below November averages. Pipeline data have poor visibility into intrastate pipeline
flows; therefore, estimates on production changes related to freeze-offs could exhibit.
Source: Barclays