{"id":39822,"date":"2016-08-25T08:00:38","date_gmt":"2016-08-25T12:00:38","guid":{"rendered":"http:\/\/www.ino.com\/blog\/?p=39822"},"modified":"2016-08-24T20:51:10","modified_gmt":"2016-08-25T00:51:10","slug":"how-the-natural-gas-storage-glut-has-been-cut-this-summer","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2016\/08\/how-the-natural-gas-storage-glut-has-been-cut-this-summer\/","title":{"rendered":"How The Natural Gas Storage Glut Has Been Cut This Summer"},"content":{"rendered":"<p style=\"margin: 0 0;\"><img loading=\"lazy\" decoding=\"async\" src=\"\/img\/sites\/ino\/email\/7551.jpg\" alt=\"Robert Boslego - INO.com Contributor - Energies\" width=\"350\" height=\"131\" class=\"alignleft size-full wp-image-30488\" style=\"padding-top: 10px;\" \/><\/p>\n<p style=\"margin: 0 0;\"><br style=\"clear:both;\"><\/p>\n<p>The National Oceanic and Atmospheric Administration (NOAA) reports cooling degree day (CDD) data for every seven-day period by state. From that data, they construct a populated-weighted national total. <\/p>\n<p>CDDs are the difference between the daily temperature mean (high temperature plus low temperature divided by two) and 65\u00b0F. If the temperature mean is above 65\u00b0F, we subtract 65 from the mean.<\/p>\n<p>Example: The high temperature for a particular day was 90\u00b0F and the low temperature was 66\u00b0F. The temperature mean for that day was:<!--more--><\/p>\n<p>(90\u00b0F + 66\u00b0F)\/2 = 78\u00b0F<\/p>\n<p>Because the result is above 65\u00b0F:<\/p>\n<p>78\u00b0F - 65\u00b0F = 13 cooling degree days.<\/p>\n<p>Cooling degree days affects natural gas use because it is a feedstock to electric utilities. Electricity powers air conditioners.<\/p>\n<p>Over time, natural gas has been replacing coal as a feedstock to utilities. It follows that to understand how summer temperatures affect natural gas consumption; it is important to know where utilities are burning natural gas and how much.<\/p>\n<p>I take NOAA\u2019s state-by-state CDD data and weight each state by its relative natural gas use at electric utilities. In that way, I get a more accurate picture of CDDs to gauge natural gas use.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"\/img\/sites\/ino\/email\/7819.jpg\" width=\"624\" height=\"438\" alt=\"Natural Gas CDD and HDD Weights\" class=\"aligncenter\" \/><\/p>\n<p>To prepare quantitative projections of future consumption, the first step is having a model that relates degree days to demand. In my model, I use three factors: heating degree days, cooling degree days, and GDP.<\/p>\n<p>With just these three factors, I have a 97% multiple regression fit since 2012. This means these factors, each of which is highly statistically significant (as indicated by the T-statistics), explains 97% of the monthly variation in demand (see graph below).<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"\/img\/sites\/ino\/email\/7820.jpg\" width=\"624\" height=\"375\" alt=\"Natural Gas Demand\" class=\"aligncenter\" \/><\/p>\n<h2 style=\"color: #003380; font-size: 17px;\">Conclusion<\/h2>\n<p>The table below shows the predicted v. actual storage levels for each week this summer. It also shows the year-over-year change.  Based on actual CDDs for last week and predicted CDDs for this week, the storage glut will have been reduced from 27% in the week ending June 3rd to just 7% for the week ending August 26th.  This is why natural gas futures prices have found support this summer. <\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"\/img\/sites\/ino\/email\/7818.jpg\" width=\"520\" height=\"281\" class=\"aligncenter\" \/><\/p>\n<p>Check back to see my next post!<\/p>\n<p>Best,<br \/>\n<a href=\"http:\/\/www.ino.com\/blog\/meet-ino-com-contributor-robert-boslego\/\" target=\"_blank\">Robert Boslego<\/a><br \/>\nINO.com Contributor - Energies<\/p>\n<p><span style=\"font-size: 12px; font-style: italic;\">Disclosure: This contributor does not own any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.<\/span><\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>The National Oceanic and Atmospheric Administration (NOAA) reports cooling degree day (CDD) data for every seven-day period by state. From that data, they construct a populated-weighted national total. CDDs are the difference between the daily temperature mean (high temperature plus low temperature divided by two) and 65\u00b0F. If the temperature mean is above 65\u00b0F, we [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":27,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6920],"tags":[6353,4607,8503,4829,375,8504,8501,8457,8502],"class_list":["post-39822","post","type-post","status-publish","format-standard","hentry","category-ino-com-contributors","tag-commitments-of-traders-cot","tag-commodity-futures-trading-commission-cftc","tag-cooling-degree-days-cdds","tag-how-to-trade-natural-gas","tag-natural-gas","tag-natural-gas-outlook","tag-natural-gas-storage","tag-robert-boslego","tag-short-term-energy-outlook-steo"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How The Natural Gas Storage Glut Has Been Cut This Summer - INO.com Trader&#039;s Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ino.com\/blog\/2016\/08\/how-the-natural-gas-storage-glut-has-been-cut-this-summer\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How The Natural Gas Storage Glut Has Been Cut This Summer - INO.com Trader&#039;s Blog\" \/>\n<meta property=\"og:description\" content=\"The National Oceanic and Atmospheric Administration (NOAA) reports cooling degree day (CDD) data for every seven-day period by state. From that data, they construct a populated-weighted national total. CDDs are the difference between the daily temperature mean (high temperature plus low temperature divided by two) and 65\u00b0F. 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