Commodities Review
US Natural Gas
Laurent Key
Key points
■ The US natural gas forward curve is, in our opinion, well priced for the start of the winter but too expensive from March to the rest of 2013. Cal 13 price forecast is $3.52/MMbtu, 40 cents below the current curve.
■ Assuming a normal US 12/13 winter is normal, Q1 13 withdrawals should be about 5 Bcf/d stronger than last year. End-of-March inventory levels are expected slightly below 1.8 Tcf in this case.
■ The current spring/summer 13 part of the curve is too high to spur enough EG demand through coal-to-gas switching during the refill season. The market would then fall amid renewed storage congestion concerns.
■ A colder-than-normal winter is the bullish risk to this forecast. Current forecasts for December point to a repeat of the cold winter start of Dec 2010.
■ The longer-term picture is more supportive, especially past 2015, when we expect that coal plant retirements and LNG exports will put strain on the forward gas balances.
■ US production should be tamed by depressed prices until 2014, then only rebound after prices realize above $5 as expected in late 2015.
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