Natural Gas Winter Arrives, But Will It Last?
Transcription
Natural Gas Winter Arrives, But Will It Last?
MORGAN NORTH STANLEY RESEARCH AMERICA Morgan Stanley & Co. LLC Adam Longson, CFA, CPA [email protected] +1 212 761 4061 Stefan Revielle [email protected] +1 212 761 6005 November 11, 2014 Natural Gas Winter Arrives, But Will It Last? Morgan Stanley Natural Gas Price Forecast (MS average Henry Hub Price Forecast, $/MMBtu) $6.00 Recent rally primarily a result of positioning, fear and short-term weather. After last winter, it’s no surprise that the market is quick to react to any sign of cold. However, we see limited upside from here without a pronounced change in the longer-term winter forecast. Upcoming cold is the result of a rare storm system moving into Alaska, not a sustained change in weather patterns as evidenced by warming late-Nov forecasts. Financial positioning also appears to be a greater driver of recent price action, rather than a bullish bet on natural gas. We continue to believe a very cold winter is required to see material upside in natural gas prices, as we see a number of both fundamental and financial headwinds that could limit upside for now (or drive some reversal). Bull $5.50 $5.00 $4.73 $4.58 $4.75 $4.50 $3.94 $4.50 $4.05 Forward curve Base $4.00 $3.50 $3.50 $3.50 $3.00 Bear $3.75 $2.50 1Q14 2Q14 3Q14e 4Q14e 2015e Legend Source: Bloomberg, Morgan Stanley Commodity Research Much Below Normal Temperatures Expected in the North Central and Northeast US (NOAA 6-10 day outlook, valid for Nov 17-21) Further near term upside may be limited. Not only is the worst of the cold likely already priced in, but we see a number of medium term headwinds: 1) Fundamentals continue to show robust supply with more NE infrastructure coming online. 2) Associated gas growth concerns are likely overblown. 3) Short covering may have been a bigger driver in the recent rally than new longs. 4) To-date, cash prices gains have failed to rival prompt month rally. 5) Under hedged producers are likely to act, with downward price pressure to follow. We believe some of these headwinds are already playing out in the selloff over the past few days. Regional balances have changed, shifting exposure to a repeat of winter 13/14. We don’t want to dismiss the growing risk that another harsh winter, but the impact would likely not be as severe. The NE is more protected with more production, improved inventories and better interconnectivity. However, the Western Canadian and New England markets are at risk of price spikes in a repeat of last winter. Unlike the L48, less robust supply growth in the WCSB, and strong US exports have kept Western Canada at a sizable YoY inventory deficit. In New England, little change to gas infrastructure and nuke retirements should support price premiums and volatility during cold winter days. Source: NOAA, Morgan Stanley Commodity Research For important disclosures, refer to the Disclosures Section, located at the end of this report. MORGAN STANLEY RESEARCH November 11, 2014 Economics Exhibit 1 Physical Cash Prices Have Yet To Show Stress (left axis: HH prompt – spot, $/MMBtu; right axis: HH futures and spot prices, $/MMBtu) $8.00 $0.40 $7.50 $0.20 $7.00 $6.50 $0.00 $6.00 -$0.20 $5.50 -$0.40 $5.00 $4.50 -$0.60 $4.00 -$0.80 $3.50 $3.00 Prompt Future - Cash (LHS) Prompt Future (RHS) Oct-14 Nov-14 Sep-14 Sep-14 Jul-14 Aug-14 Jul-14 Jun-14 Apr-14 May-14 Apr-14 Mar-14 Feb-14 Jan-14 Feb-14 Dec-13 Dec-13 Oct-13 Nov-13 -$1.00 Oct-13 Recent Rally More Related to Positioning and Fear, and May Have Limited Upside. After last winter, it’s no surprise that the market is quick to react to any sign of cold weather. However, we see limited upside from here without a pronounced change in the longer term winter weather forecast. The upcoming cold is a reflection of a rare storm system moving into Alaska, not a sustained change in weather patterns. Furthermore, financial positioning appears to be a greater driver of recent price action, rather than a bullish bet on natural gas. We continue to believe a very cold winter is required to see material upside in natural gas prices, as we see a number of both fundamental and financial headwinds that could limit upside for now (or even cause some reversal). In fact, we believe some of this dynamic is already playing out in the selloff over the past few days. HH Spot (RHS) Source: CME, Morgan Stanley Commodity Research Short covering may have been a bigger driver in the recent rally than new longs. Managed money net position was net long by just 75K contracts across all futures exchanges as of Oct 28, the lowest level since Apr 2012 and 513K less length than its Feb peak. Since Sep, managed money net length had declined 142K contracts and Cal 2015 prices fell 22 cents thanks to record supply growth and initial prospects for a warmer than normal Nov. With positioning so short, it should be no surprise that an abrupt change in the weather outlook drove a run up in futures prices –especially after the price action last winter. However, we believe much of the rally has been the result of short covering rather than fundamental buyers who typically provide more staying power in bullish price runs as proven by the 33K increase in Managed Money positions from Oct 28 to Nov 4. Our view is also partly corroborated by the slight easing in futures prices over the past few days. Exhibit 2 Managed Money Positioning Was Too Short (LHS: Disaggregated CFTC data for Managed Money net position, # of contracts, RHS: 12 month average HH prices, $/MMbtu) 800,000 $5.00 $4.75 600,000 $4.50 $4.25 400,000 $4.00 200,000 $3.75 $3.50 0 $3.25 -200,000 Jan-13 $3.00 Apr-13 Jul-13 Nov-13 NYMEX MMNet NYMEX Swap MM Net NYMEX Euro Style Opt MM Net ICE Pen MMNet Generic 12 mo stip (rhs) Feb-14 Jun-14 Sep-14 ICE HH OTC MM Net NYMEX HH Pen Swap MM Net HH Last Day Fin MM Net Total Source: CFTC, NYMEX, ICE, Morgan Stanley Commodity Research Exhibit 3 To-date, cash prices gains have failed to rival prompt month rally. While it is not rare to see cash/prompt price divergence, the key fundamental spread is at recent highs pointing to a physical/financial disconnect. At the time of writing, cash henry hub prices remain 20 cent under Dec Henry Hub futures prices, meaning physical buyers have yet to enter the market in advance of recent cold forecasts. Such divergences cannot persist for long. Either physical markets need to confirm the signal (and they could next week), or futures need to come back to reality. Regardless, the physical/financial disconnect doesn’t bode well for further upside in futures given much of the “good news” is already priced in. Thus far, it appears we are seeing both some improvement in cash and retreat of futures. Producer/Merchant/Processor (PMP) May Have An Opportunity to Hedge (LHS: Disaggregated CFTC data for PMP net position, # of contracts, RHS: reverse 12 month average HH prices, $/MMbtu) $0.00 600,000 $1.00 400,000 $2.00 $3.00 200,000 $4.00 $5.00 0 $6.00 -200,000 $7.00 Jan-10 Aug-10 Mar-11 Sep-11 Apr-12 Nov-12 Jun-13 Jan-14 Aug-14 NYMEX PMP Net NYMEX Swap PMP Net NYMEX Euro Style Opt PMP Net ICE Pen PMP Net Generic 12 month strip (rhs) ICE HH OTC PMP Net NYMEX HH Pen Swap PMP Net HH Last Day Fin PMP Net Total Source: CFTC, NYMEX, ICE, Morgan Stanley Commodity Research 2 MORGAN STANLEY RESEARCH November 11, 2014 Economics Under hedged producers are likely to act, with downward price pressure to follow. While non-commercial investors had positioned for downside, commercial players have logged record net length. On the producer side, futures prices have given limited opportunities to lock in 2015 hedges as 2015 calendar year prices. Despite optimism in early summer, the 2015 strip fell below the $4/MMbtu mark in July and has yet to bounce back. In total, the latest CFTC data shows that the producers, merchants and processors group held 369K in net length as of Oct 28 which is the longest the investor group has been positioned dating back to 2010. Given the relatively quiet activity from the producer side, we think increased activity will follow recent rallies and likely contribute to downside pressure. On the consumer side, news sources suggest many NE utilities have increased winter gas hedges, which has added to the length. Exhibit 4 US Storage Inventories Continue to Inject at Seasonal Highs (Weekly storage injections, Bcf) 130 110 90 70 50 30 10 (10) (30) (50) Apr-14 Jun-14 Aug-14 09-13 range Oct-14 Avg 2013 2014 Source: EIA, Morgan Stanley Commodity Research Exhibit 5 Supply Side Is Likely to Remain a Problem US Dry Gas Production Now at +70 Bcf/d Fundamentals continue to show robust supply with another week of injections ahead. US storage facilities in the US have added ~2.7 Tcf this injection season, 10% more than previous records to date. With likely one more injection left this season, we estimate inventories will peak at ~3.62 Tcf or 211 Bcf below starting levels last winter. In the EIA East region, where inventories were most dire last winter, the YoY storage deficit is expected to shrink to minimal levels thanks to record production growth and mild temperatures this summer. Even in the EIA producing and west regions, where deficits are likely to remain ahead of winter, the trickle-down impact of supply growth out of the NE and fewer seasonal imports to meet NE demand, lessens the importance of regional storage shortfalls. (Daily US dry gas production, Bcf/d) 72 71 70 69 68 67 66 65 64 63 Oct-14 Nov-14 Sep-14 Jul-14 dry gas production Aug-14 Jun-14 Apr-14 May-14 Mar-14 Jan-14 Feb-14 Dec-13 Oct-13 Nov-13 62 30 day MAV Source: Bentek Energy, Morgan Stanley Commodity Research Exhibit 6 NE production growth continues to carry supply higher with a tailwind from new infrastructure. The Northeast supply basins continue to drive total US supply higher with recent pipeline estimates for the region surging past 17 Bcf/d and pushing total US dry gas supply above 70 Bcf/d, ~4 Bcf/d higher than the same time last year. As we speak, 8 different NE expansion projects are experiencing varying levels of line-fill, and are still expected to add 1.3 Bcf/d to supply ahead of winter. So far, it is estimated that 0.3 Bcf/d of “new” supply has entered the newly added pipes. The fact that the pace of growth on new additions is slower than last year shouldn’t be a surprise given more of this infrastructure is directed at SW PA/Utica. Production growth should eventually match expectations, but targets may take longer to reach. Given the number of well tie-ins with this year’s expansions are liquids-heavy and require processing (as opposed to the dry wells in NE Marcellus last year), there may be an additional time-lag not witnessed in 2013. 50% of Associated US Gas Supply Comes from Plays with Breakevens Below ~$60/bbl (y-axis: 2013 marginal breakeven price* by project on a Brent-equivalent basis, $/bbl; x-axis: incremental production added from 2013-2018, mmb/d) 105 95 85 83 High 75 65 60 55 45 38 35 25 Avg 57 40 41 41 27 Low 15 Source: Rystad Energy, Morgan Stanley Commodity Research estimates Note: Breakeven prices assume a 10% hurdle rate 3 MORGAN STANLEY RESEARCH November 11, 2014 Economics Exhibit 7 Associated Gas Growth Has Been High, But A Fair Amount Never Makes It To Market (LHS: Gross gas withdrawals from oil wells, Bcf/d; RHS: Production vented & flared, Bcf/d) 9 1.6 8 1.4 7 1.2 6 1.0 5 0.8 4 0.6 3 0.4 2 West 2013 2012 2011 2010 2009 2008 2006 2005 2004 2007 Midwest Vented/Flared (rhs) Western Canada Stocks Remain At a Sizable YoY Deficit (Working gas storage levels, Bcf) 600 500 A repeat of winter 13/14 may have a different outcome. While no one will deny that another harsh winter would be bullish for natural gas, we don’t expect the same exact outcome. As we’ve written (see Coal, Gas & Power: 300 200 100 Cross-Industry Implications of Marcellus/Utica Gas Basis; Bearish Natgas Outlook (25 Sep 2014)), a number of one-off number of markets this year, namely Western Canada and New England. South Exhibit 8 400 Northeast Utilities in PJM having hedged 70% of their winter gas, a 15% increase YoY, which should limit spot buying this winter. That said, we see risk of greater upside in a Northeast Source: EIA 2013 Natural Gas Annual, Morgan Stanley Commodities Research Note: All totals exclude AK volumes and 2013 data may not be complete New Regional Issues Will Continue to Emerge issues compounded the challenges in the NE last winter that are unlikely to repeat to the same degree (freeze offs, a compressor failing, etc.). With storage, production, interconnectivity and reliability all improved in the NE YoY, we don’t expect the same upside without some major issue in the supply chain, namely with coal deliverability. Similarly, Eastern Canada storage is higher YoY despite nearly fully depleting last winter. These dynamics may result in less call on imports from other regions, which could support storage better than last winter. Moreover, news sources point to the fact that many 2003 0.0 2002 0.2 0 2001 1 2000 Associated gas growth concerns overblown? Gas supplies associated with oil-directed drilling have contributed a significant amount, between 2-3 Bcf/d per annum, over the past two years. While the decline in oil prices has created concern about this supply source, we see a number of offsets that should support associated gas next year. 1) Exceptionally low breakevens in the Eagle Ford and Permian, where 50% of associated gas is produced, likely shields most growth. 2) According to EIA, 20% of L48 associated gas production was reinjected in 2013 (mostly TX), while ~11% was flared (mostly TX and ND), limiting the market impact. High gas flaring and reinjection negates the gas market impact of a marginal pullback in the basin. 3) Thus far, NGL prices have not been materially impacted by oil price moves, but lower oil prices can result in declining NGL margins and frac spreads, increasing the likelihood of ethane rejection, which boosts gas supply. 4) Oil price declines can lead to reallocation of CAPEX to some previously marginal gas plays, 5) Lower freight fuel costs lead to lower coal prices and potentially gas prices due to coal/gas switching economics. 6) Oil producer inertia (hedging, debt covenant obligations, midstream agreements, and rig contracts) may also limit the magnitude of slowdown in the near term. 0 Jan-14 Mar-14 May-14 5-yr Range Jul-14 2013 Sep-14 2014 Nov-14 5-yr Avg Source: Enerdata, Morgan Stanley Commodity Research Exhibit 9 Alberta/BC/Saskatchewan Production Has Responded Little to Higher Prices (Natural gas production, Bcf/d) 15.00 14.50 14.00 13.50 13.00 12.50 12.00 11.50 Jan Feb Mar Apr 5-Y range May Jun 5-Y avg Jul Aug Sep 2013 Oct Nov Dec 2014 Source: Company Data, Morgan Stanley Commodity Research 4 MORGAN STANLEY RESEARCH November 11, 2014 Economics In Western Canada, low stocks and lagging supply growth leaves AECO prone to price spikes. Like the US, stocks in Canada were hit hard during last winter’s multiple polar vortex events. Stocks in Western Canada began the injection season at a 190 Bcf YoY storage deficit while stocks in Eastern Canada nearly fully depleted. While Eastern Canada has largely recovered and is nearly 100% full heading into winter (a YoY surplus), Western Canadian stocks remain 26% lower than last year and at 5-year lows. Unlike the US, Canadian gas production growth has lagged, growing only 0.4 Bcf/d YoY YTD despite prices in Alberta averaging $1.20/MMbtu higher YoY. Subsequently, we see the region susceptible to price spikes similar to last year, and certainly if winter cold rivals last winter. The caveat is that higher Eastern Canadian stocks and a potential lower pull on Canadian exports from the NE could keep Western Canada more balanced than starting inventories would suggest. In New England, infrastructure and limited supply optionality should keep winter Algonquin prices bid. While the greater Appalachian market is undergoing another wave of infrastructure additions, improving connectivity throughout the region, New England gas markets have yet to benefit from nearby cheap gas. We caution that not only has infrastructure feeding the greater Boston market not changed YoY, leaving potential for gas supply shortfalls this winter, but the retirement of the 620 MW Vermont Yankee facility will also add to market tightness. Therefore, in a similar winter event as last year, the region would likely experience similar type pricing spikes just to attract supply molecules to meet demand peaks. At a minimum, New England may need to compete with global markets for LNG supply which fortunately have fallen with the recent oil price decline. 5 MORGAN STANLEY RESEARCH November 11, 2014 Economics Exhibit 10 Morgan Stanley US Natural Gas Supply Demand Balance SUPPLY Gross Production L48 YoY Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 75.4 75.1 76.2 76.8 77.7 78.3 78.7 79.6 ------> Forecast Sep-14 Oct-14 77.8 79.0 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 79.3 79.3 80.5 80.1 80.8 80.9 80.6 81.4 81.9 81.8 82.1 83.2 83.6 Dec-15 83.4 2.9 2.3 3.6 3.6 4.5 5.5 4.0 5.1 4.3 5.0 4.9 6.7 5.1 5.0 4.6 4.1 2.9 3.2 3.2 2.2 4.3 4.1 4.3 4.2 L48 Gas (Conventional) CBM Onshore L48 Shale 28.7 3.2 31.3 28.5 3.1 31.1 28.2 3.1 31.2 28.0 3.0 32.0 27.8 3.0 32.0 27.6 3.0 32.0 27.4 2.9 33.3 27.2 2.9 33.0 27.0 2.9 33.0 26.7 2.9 33.9 26.5 2.9 34.1 26.3 2.8 34.1 26.1 2.7 34.5 25.9 2.6 34.4 25.7 2.6 35.2 25.5 2.5 35.3 25.3 2.5 35.1 25.1 2.5 36.0 24.9 2.4 36.4 24.7 2.4 36.2 24.5 2.4 36.5 24.3 2.4 37.5 24.2 2.4 37.9 24.0 2.3 37.9 YoY 1.82 1.94 1.85 1.83 1.65 1.56 2.46 2.41 2.69 2.73 2.5 2.2 3.3 3.4 3.99 3.3 3.1 4.0 3.1 3.3 3.5 3.69 3.8 3.8 Barnett 4.9 4.8 4.8 4.7 4.6 4.6 4.5 4.5 4.4 4.4 4.3 4.3 4.2 4.2 4.2 4.1 4.1 4.1 4.0 4.0 4.0 3.9 3.9 3.9 Fayetteville 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 Woodford 0.8 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 Haynesville 5.3 5.3 5.1 5.1 5.1 5.0 5.0 5.0 4.9 4.9 4.9 4.9 4.9 5.0 5.0 5.0 5.0 5.0 4.9 4.8 4.8 4.7 4.7 4.7 Haynesville (LA) 4.4 4.5 4.3 4.3 4.3 4.3 4.2 4.2 4.2 4.2 4.2 4.2 4.1 4.1 4.1 4.1 4.1 4.1 4.1 4.0 4.0 4.0 4.0 Haynesville (TX) 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.7 0.7 0.7 0.7 0.7 0.8 0.8 0.9 0.9 0.9 1.0 0.8 0.8 0.7 0.7 0.7 0.6 9.7 10.0 10.2 10.7 11.0 11.5 11.4 11.4 11.7 12.0 12.2 12.1 12.5 12.7 13.3 13.0 13.0 13.0 13.3 13.5 14.1 14.5 14.9 14.8 SW Marcellus 2.7 2.7 2.6 2.8 2.8 3.0 3.1 3.1 3.4 3.6 3.8 3.7 4.2 4.3 4.5 4.3 4.4 4.4 4.5 4.6 5.1 5.4 5.7 5.6 NE Marcellus Marcellus 4.0 7.0 7.3 7.6 7.9 8.2 8.4 8.3 8.3 8.3 8.3 8.4 8.4 8.3 8.4 8.8 8.7 8.6 8.6 8.8 8.9 9.0 9.1 9.2 9.3 WV 1.7 1.7 1.8 1.8 1.9 1.9 2.0 2.0 2.1 2.1 2.2 2.2 2.3 2.3 2.4 2.4 2.5 2.5 2.6 2.6 2.7 2.7 2.8 2.8 Eagle Ford 2.8 2.8 2.8 2.8 2.9 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.9 2.9 3.0 3.0 3.0 3.1 3.1 3.1 3.2 3.2 3.2 3.3 Utica 0.6 0.7 0.7 0.8 0.9 1.0 1.1 1.1 1.2 1.3 1.4 1.4 1.5 1.6 1.6 1.7 1.8 1.8 1.9 1.9 2.0 2.1 2.1 Other Shale 2.8 2.3 2.3 2.6 2.2 1.7 3.1 2.7 2.3 3.0 2.9 2.9 2.8 2.3 2.3 2.6 2.2 3.0 3.1 2.7 2.3 3.0 2.9 2.9 Onshore L48 Associated 8.4 8.9 9.1 9.7 10.0 10.3 10.5 10.7 10.9 11.0 11.2 11.3 12.3 12.3 12.4 12.8 12.8 13.1 13.4 13.6 13.9 14.0 14.4 14.4 YoY 2.4 2.5 2.6 2.9 3.1 3.1 3.1 3.2 3.2 3.1 3.1 3.2 3.9 3.4 3.4 3.1 2.8 2.8 2.9 2.9 3.0 3.1 3.2 3.1 Bakken 0.6 0.7 0.7 0.8 0.8 0.9 0.9 0.9 0.9 0.9 1.0 0.9 0.9 0.9 0.9 1.0 1.0 1.0 1.0 1.0 1.1 1.1 1.1 1.1 Eagle Ford 1.5 1.6 1.7 1.9 2.1 2.2 2.2 2.2 2.2 2.3 2.3 2.4 2.7 2.8 2.7 2.8 2.8 2.9 2.9 3.0 3.0 3.0 3.1 3.1 Perm ian 2.2 2.3 2.5 2.6 2.7 2.7 2.8 2.8 2.8 2.9 2.9 2.9 3.3 3.1 3.3 3.3 3.3 3.3 3.4 3.5 3.5 3.6 3.6 3.7 Mississippian 0.6 0.7 0.6 0.6 0.6 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.8 0.7 0.8 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.8 Denver Julesberg 1.0 1.0 0.9 0.8 0.8 0.8 0.8 0.9 0.9 0.9 0.9 0.9 0.9 1.0 0.9 1.0 1.0 1.1 1.1 1.2 1.2 1.3 1.3 1.3 Utica Oil 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Other Associated 2.4 2.5 2.6 2.7 2.8 2.9 3.0 3.0 3.1 3.1 3.2 3.2 3.5 3.5 3.5 3.6 3.6 3.7 3.8 3.9 4.0 4.0 4.1 4.1 3.3 3.4 3.3 3.5 3.5 3.4 3.4 3.4 3.2 2.9 3.2 3.1 2.9 3.0 2.9 3.1 3.1 3.1 3.0 3.0 2.9 2.6 2.8 2.7 -0.7 -0.5 -0.5 -0.4 -0.2 0.0 -0.2 0.0 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.3 -0.4 -0.3 Offshore GOM YoY Balancing Dry Production L48 YoY NET IMPORTS Canada YoY Mexico YoY LNG YoY DEMAND Residential/Commercial YoY Electric Power YoY Industrial Demand YoY Vehicle Demand YoY Lease Plant/Pipeline Fuel YoY Total Demand YoY BALACING ITEM STORAGE INJ/WTH (Bcf) Bcf/d Ending Storage 0.3 3.8 3.6 4.6 4.1 4.9 5.4 4.7 5.9 4.2 4.6 4.7 4.8 4.8 4.9 4.9 4.8 4.8 4.7 4.8 4.8 4.8 4.8 4.8 4.8 67.8 67.5 68.2 68.6 69.5 69.8 70.1 70.9 70.3 71.2 72.1 71.9 71.3 70.9 71.3 71.2 70.9 71.5 71.9 71.7 73.6 74.4 75.4 75.1 3.3 2.7 3.7 3.5 4.2 4.7 3.2 4.1 3.8 4.5 4.4 6.3 3.6 3.5 3.1 2.6 1.4 1.7 1.8 0.8 3.3 3.2 3.3 3.2 6.6 5.6 4.5 4.4 5.0 4.6 4.5 5.1 5.0 4.4 4.7 5.9 6.1 5.1 4.0 4.2 4.8 4.4 4.3 4.9 4.8 4.2 4.5 5.7 1.3 0.6 -0.2 -0.4 0.2 -0.5 -0.7 0.0 -0.3 -0.3 -0.5 -0.5 -0.5 -0.5 -0.5 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 (1.7) (1.8) (1.9) (1.9) (2.0) (2.2) (2.2) (2.1) (2.4) (2.2) (1.9) (1.9) (2.2) (2.3) (2.4) (2.4) (2.5) (2.7) (2.7) (2.6) (2.9) (2.7) (2.4) (2.4) 0.1 -0.1 -0.1 -0.1 -0.1 -0.2 -0.2 -0.1 -0.7 -0.5 -0.3 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 (0.0) (0.0) (0.0) (0.0) (0.0) (0.6) (0.7) 0.3 YoY Total Net Imports 2.2 -0.2 5.2 1.2 51.2 7.6 21.3 1.0 23.3 1.5 0.09 0.0 7.8 0.8 103.7 10.9 0.1 (951) (30.7) 1,925 0.1 -0.3 3.9 0.2 47.7 5.6 19.8 -0.4 23.7 1.5 0.09 0.0 7.6 0.6 98.9 7.3 1.6 (726) (25.9) 1,200 0.1 -0.2 2.7 -0.5 35.6 1.5 18.0 -1.4 22.0 1.0 0.09 0.0 7.2 0.5 82.8 1.5 0.8 (343) (11.1) 857 0.1 -0.1 2.6 -0.5 19.8 -0.7 18.3 -0.4 20.9 0.9 0.09 0.0 6.6 0.5 65.8 0.3 0.1 -0.1 3.0 0.1 11.9 0.2 20.9 1.1 19.6 0.5 0.09 0.0 6.5 0.6 58.9 2.4 0.3 0.1 2.7 -0.7 8.8 0.0 24.0 -0.5 19.6 0.8 0.09 0.0 6.5 0.6 58.9 0.9 0.2 -0.1 2.5 -1.0 7.8 -0.1 27.1 -2.1 19.6 1.0 0.09 0.0 6.6 0.5 61.2 -0.8 0.1 -0.2 3.0 -0.4 7.6 -0.3 28.8 -0.1 19.7 0.6 0.09 0.0 6.7 0.6 62.9 0.8 1.6 1.7 1.7 1.7 1.2 213 7.1 1,066 475 15.3 1,548 459 15.3 2,005 405 13.1 2,402 378 12.2 2,769 0.4 -0.2 2.9 -1.1 8.8 0.2 24.7 -0.3 19.3 0.1 0.09 0.0 6.2 0.2 59.1 0.2 0.0 2.4 -0.8 12.5 -1.4 20.2 -0.3 19.7 0.0 0.09 0.0 6.3 0.2 58.7 -0.1 2.7 -0.9 24.9 -3.9 20.4 0.5 20.7 -1.0 0.09 0.0 6.8 0.1 72.9 -0.1 3.9 -1.1 40.8 -1.9 20.7 -0.6 22.1 -0.6 0.09 0.0 7.4 0.2 91.1 0.3 -1.5 -4.3 (0.5) (2.2) (2.2) (1.1) (10) (0.3) 3,559 (508) (16.4) 3,051 407 13.6 3,176 394 12.7 3,570 -2.9 0.2 -0.1 4.1 -1.1 46.4 -4.7 20.5 -0.8 22.7 -0.6 0.09 0.0 7.9 0.1 97.7 -6.0 0.1 (688) (22.2) 2,363 0.0 -0.1 2.8 -1.1 44.4 -3.3 20.9 1.2 22.7 -1.0 0.09 0.0 7.8 0.2 95.9 -2.9 1.6 (578) (20.6) 1,786 -0.1 1.6 -1.1 30.9 -4.6 17.9 0.0 22.2 0.2 0.09 0.0 7.3 0.1 78.4 -4.4 0.8 (145) (4.7) 1,641 -0.1 1.8 -0.8 19.3 -0.6 22.4 4.1 21.2 0.3 0.09 0.0 6.9 0.3 69.9 4.1 -0.1 2.2 -0.8 12.2 0.3 24.3 3.4 20.4 0.8 0.09 0.0 6.7 0.3 63.7 4.8 0.2 -0.1 1.9 -0.8 9.1 0.2 28.1 4.1 19.9 0.3 0.09 0.0 6.8 0.3 63.9 5.0 0.1 -0.1 1.7 -0.8 7.4 -0.4 32.0 4.9 19.7 0.1 0.09 0.0 6.9 0.3 66.1 4.9 (0.1) 0.3 -0.1 -0.1 2.2 2.1 -0.8 -0.8 7.6 8.5 0.0 -0.3 33.1 28.5 4.3 3.8 19.6 19.9 -0.1 0.7 0.09 0.09 0.0 0.0 6.9 6.5 0.2 0.3 67.3 63.6 4.4 1.6 1.7 1.7 1.7 1.2 140 4.7 1,781 344 11.1 2,125 336 11.2 2,460 283 9.1 2,743 239 7.7 2,982 6 -0.1 -0.8 13.9 1.5 22.3 2.1 20.7 1.1 0.09 0.0 6.6 0.3 63.6 -0.6 1.4 -1.3 24.9 0.0 21.3 0.9 21.8 1.1 0.09 0.0 7.1 0.3 75.3 -0.6 2.6 -1.3 40.8 0.0 21.6 0.9 23.6 1.5 0.09 0.0 7.7 0.3 93.7 4.4 4.9 2.3 (0.5) (2.2) (2.2) (1.1) (21) (0.7) 3,624 (532) (17.2) 3,092 349 11.6 3,330 Source: EIA, HPDI, Bentek Energy, Morgan Stanley Commodities Research 0.1 1.6 315 10.2 3,645 2.6 MORGAN STANLEY RESEARCH November 11, 2014 Economics 7 MORGAN STANLEY RESEARCH November 11, 2014 Economics Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley & Co. 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