Natural Gas Storage Summary

For natural gas report week, May 21, 2020, the EIA reported a net increase in storage of 81 Bcf. The injection was in line with forecasts of injections ranging from 73 Bcf to 91 Bcf and averaging 83 Bcf. Last year for the same week there was an injection of 101 Bcf and the five-year average is an injection of 87 Bcf.

Working gas in storage was 2,503 Bcf as of Friday, May 15th, 2020 per EIA estimates. Inventory was reported at 779 Bcf (45.2%) higher than last year for the same week and 407 Bcf (19.4%) more than the five-year average of 2,096 Bcf.

Natural Gas Market Recap

June NYMEX graph for natural gas May 21 2020 report

June NYMEX: Settled Thursday at $1.710/Dth down 6.1 cents from Wednesday’s close at $1.771/Dth.

12 month strip for natural gas May 21 2020 report

12 Month Strip: Settled Thursday at $2.362/Dth, down 3.0 cents from the prior week.

seasonal strips graph for natural gas May 21 2020 report

Seasonal Strips: The summer strip (JUN20-OCT20) settled Thursday at $1.914/Dth, down 3.2 cents from the week prior. The winter strip (NOV20-MAR21) settled at $2.758/Dth, down 3.2 cents from last week.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – May 21, 2020

 

1. Natural Gas Fundamentals

Overall supply averaged 94.2 Bcf/d last week as production dropped by 2.1% and imports from Canada increased by 1.0%. According to the EIA, “ EQT Corporation, the largest natural gas producer in the United States, announced on Tuesday it started reducing production in Pennsylvania and Ohio on May 16 as a result of lower demand and prices.”

Total demand fell by 10.0% from the prior report week. Residential-commercial consumption decreased by 40.8% as home-heating use normalized when temperatures moderated following unseasonably cold weather the prior week. Industrial demand decreased 3.8% from last week while consumption for power generation grew by 11.3%. Exports to Mexico increased by 2.5%. For the second week in a row, LNG exports decreased, down one LNG vessel to ten with a combined carrying capacity of 37 Bcf.

According to data from Enverus, the daily rig count fell by 27 from last week, down 7.0% to 339.

 

2. Utility Prices On The Rise? 

With declining consumption and many customers unable to pay utility bills, power companies are looking for ways to appease investors’ interest in protecting profits while avoiding rate increases for consumers. Developing a precise plan has proven difficult, though, with the “return to normal” still unclear.

According to E&E News, industry executives recently shared their plans for securing profitability. Some organizations are slashing spending on travel and hiring in addition to cutting capital investments. Others have signaled they may turn to state regulatory agencies for permission to pursue future rate increases to cover bad debt.

“FirstEnergy Corp. CEO Chuck Jones told analysts last month that his company, which has electric utilities serving about 6 million customers from Ohio to the Jersey Shore, is designed to weather the downturn in the economy.

Almost two-thirds of base electric distribution revenue comes from residential sales, which are up as consumers stay home from work and school, Jones said. And 20% of electric sales come from Ohio, where electric rates are decoupled from kilowatt-hour sales volumes.

‘Our rate structures provide a measure of stability, even in tumultuous times,’ he said.”

 

3. Natural Gas Dinosaur Retires

After more than 35 years at work, natural gas pipeline dinosaur, SEL 810A retired from the industry to play the classic video game, Lunar Lander.

According to the manufacturer’s 1967 brochure, “the SEL 810A Computer and its enviable field reputation for reliability and performance, has made it the first choice of a large and rapidly growing list of customers with requirements running the full gambit of industrial and scientific real-time applications.”

According to a Hackaday story from this week, “The computer was actually very advanced for its day, providing an all IC-based 16-bit computer.” If you’re looking for a bit of gaming or computing nostalgia, the story also includes a video of somecomputerguy (YouTube) firing it up and running the game. It’s worth the six minutes.

SEL 810A computer

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Natural Gas Storage Summary

For natural gas report week, May 14, 2020, the EIA reported a net increase in storage of 103 Bcf. The injection was in line with forecasts of injections ranging from 93 Bcf to 115 Bcf. Last year for the same week there was an injection of 100 Bcf and the five-year average is an injection of 85 Bcf.

Working gas in storage was 2,422 Bcf as of Friday, May 8th, 2020 per EIA estimates. Inventory was reported at 799 Bcf (49.2%) higher than last year for the same week and 413 Bcf (20.6%) more than the five-year average of 2,009 Bcf.

Natural Gas Market Recap

June NYMEX graph for natural gas May 14 2020 report

June settled Thursday at $1.681/Dth up 6.5 cents from Wednesday’s close at $1.616/Dth

12 month strip for natural gas May 14 2020 report

Settled Thursday at $2.392/Dth, down 12.9 cents from the prior week.

seasonal strips graph for natural gas May 14 2020 report

The summer strip (JUN20-OCT20) settled Thursday at $1.946/Dth, down 21.8 cents from the week prior. The winter strip (NOV20-MAR21) settled at $2.790/Dth, down 7.8 cents from last week.

Natural Gas Weekly

Natural Gas Report – May 14, 2020

 

Natural Gas Fundamentals

Overall supply averaged 96.0 Bcf/d last week as imports from Canada increased by 17.3% and production increased by 0.2%.

Total demand increased by 9.3% from the prior report week. Notably, residential-commercial consumption increased by 34.1% as heating-related consumption rose. Industrial demand increased 3.0% from last week and exports to Mexico increased by 3.8%. Natural gas used for power generation fell by 1.2%.  LNG exports decreased from last week, down 4 LNG vessels to 11 with a combined carrying capacity of 40 Bcf

According to data from Enverus, the daily rig count fell by 17 from last week, down 4.0% to 366.

 

Enbridge Pipeline Update

Flow from the Appalachia Basin remains restricted following the May 4th Enbridge-TETCO pipeline explosion. While 0.9 Bcf/d of the line’s 1.3 Bcf/d capacity has been rerouted, the line won’t return to service for the next two to three weeks.

According to an Enbridge critical notice posted May 8th,TE is in the process of evaluating options to restore partial capacity. TE will address all of the site-specific concerns identified by the National Transportation Board (so NTSB) and the Pipeline & Hazardous Materials Safety Administration (PHMSA) and will be undertaking rigorous inspections on all of the lines in the area. At this time, TE anticipates it will continue to restrict to zero, for a minimum of, an additional two to three weeks from today. These pipelines will not be returned to service until we satisfy regulatory requirements and it is safe to do so. Furthermore, NTSB has assumed control of the incident site. The NTSB and PHMSA are investigating the incident and Texas Eastern is supporting that investigation.”

 

Extensive Reach

The TETCO pipeline is over 9,000 miles long and runs from the United States-Mexico border to New York City. It supplies natural gas to electric generation facilities in high-demand markets in the northeastern United States. The Appalachia Region system is composed of thee lines – Line 10, Line 15, and Line 25. Last week’s explosion occurred on Line 10 of its 30-inch pipeline system just north of the Owingsville, Kentucky Compressor Station.

 

Other Recent TETCO Issues in the Region

A rupture on a segment of Line 10 in Berne, Ohio in January 2019 returned to full service after ten weeks.

In August 2019, an explosion on Line 15 occurred in Danville, Kentucky which is just upstream from last week’s location. Following the August explosion, PHMSA issued a ‘corrective action order’ that required TETCO to “keep Line 15, where the explosion occurred, and Lines 10 and 25 (located next to Line 15), offline…indefinitely.” Line 25 returned to service almost a month after the Line 15 explosion and Line 15 is still out of service, nearly a year later. Genscape expects that “…Line 15 and possibly Line 25 will be excavated and checked for external damage. Internal damage will be checked with in-line tools prior to returning to service.”

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Natural Gas Storage Summary

For natural gas report week, May 7, 2020, the EIA reported, the EIA reported a net increase in storage of 109 Bcf, in line with forecasts of injections ranging from 90 Bcf to 112 Bcf and averaging 106 Bcf. Last year for the same week there was an injection of 96 Bcf and the five-year average is an injection of 74 Bcf.

Working gas in storage was 2,319 Bcf as of Friday, May 1st, 2020 per EIA estimates. Inventory was reported at 796 Bcf (52.3%) higher than last year for the same week and 395 Bcf (20.5%) more than the five-year average of 1,924 Bcf.

Natural Gas Market Recap

June NYMEX graph for natural gas May 7 2020 report

Settled Thursday at $1.894/Dth down 5.0 cents from Wednesday’s close at $1.944/Dth

12 month strip for natural gas May 7 2020 report

Settled Thursday at $2.521/Dth, down 7.1 cents from the prior week.

seasonal strips graph for natural gas May 7 2020 report

The summer strip (JUN20-OCT20) settled Thursday at $2.521/Dth, up 29.1 cents from the week prior. The winter strip (NOV20-MAR21) settled at $2.868/Dth, down 8.4 cents from last week.  

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – May 7, 2020

 

Natural Gas Fundamentals

Overall supply averaged 95.4 Bcf/d last week as imports from Canada decreased by 4.6% and production declined by 1.3%. The decline is largely due to a supply drop in the Appalachia Basin following Tuesday’s Enbridge pipeline explosion on its TETCO system Tuesday. The event reportedly impacts more than 1.3 Bcf north-to-south capacity. Production fell immediately following the explosion but began to recover by the following day as transport was rerouted. This follows an NGPL force majeure at the Sabine Pass liquefaction facility in Louisiana the prior week.

Total demand fell by 15.3% from the prior report week. Notably, residential-commercial consumption declined by 38.2%, dropping from 20.9 Bcf/d to 13.0 Bcf/d week-over-week. Industrial demand fell 11.8% from last week and exports to Mexico decreased by 5.3%. Natural gas used for power generation increased by 0.5%.  LNG exports increased from last week, up 4 LNG vessels to 15 with a combined carrying capacity of 54 Bcf.

According to data from Enverus, the daily rig count fell by 32 from last week, down 7.0% to 383.

 

Natural Gas Prices 

Following Tuesday’s pipeline explosion, prompt month prices traded up to $2.134/Dth as calendar and seasonal strips generally rose in the days leading up to the release of the EIA storage report. However, demand decimation contributed to the season’s first triple digit injection and the supply-demand imbalance led to lower prices in all but the diminishing summer strip.

The future of oil prices will ultimately have substantial impact of the direction of natural gas prices. The brief price rally came to an end, even after the week’s build came in at 4.6 mb – substantially below analysts’ expectations of 8.99 mb. According to Fox Business, “Demand for crude oil has fallen by 30 million barrels per day as “stay-at-home” orders from governments all over the world have brought non-essential travel to a crawl. At the same time, the world’s largest oil producers have begun cutting production by 20 million barrels per day on May 1.”

Cuts in oil production translate to less associated natural gas production. As most states unwind their stay-at-home orders and people return to work, demand will begin to normalize which will provide a clearer price picture. Should oil prices remain low, it’s likely natural gas prices will begin to rise.  

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Current conditions are setting up for a spike in gas prices at the start of winter. Is it time to reassess your risk tolerance and plan in advance of seasonal volatility?  Contact us at 1-866-646-7322.

Natural Gas Storage Summary

For natural gas report week, April 30, 2020, the EIA reported a net increase in storage of 70 Bcf, in line with forecasts of injections ranging from 64 Bcf to 82 Bcf and averaging 71 Bcf. Last year for the same week there was an injection of 114 Bcf and the five-year average is an injection of 74 Bcf.

Working gas in storage was 2,210 Bcf as of Friday, April 24th, 2020 per EIA estimates. Inventory was reported at 783 Bcf (54.9%) higher than last year for the same week and 360 Bcf (19.5%) more than the five-year average of 1,850 Bcf.

Natural Gas Market Recap

June NYMEX graph for natural gas April 30 2020 report

May moved off the board Tuesday, April 28th, settling the month at $1.794/Dth. June settled Thursday at $1.949/Dth up 8.0 cents from Wednesday’s close at $1.869/Dth.

12 month strip for natural gas April 30 2020 report

Settled Thursday at $2.592/Dth, up 10.9 cents from the prior week.

seasonal strips graph for natural gas April 30 2020 report

The summer strip (JUN20-OCT20) settled Thursday at $2.230/Dth, up 9.3 cents from the week prior. The winter strip (NOV20-MAR21) settled at $2.952/Dth, up 7.1 cents from last week.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – April 30, 2020

 

1. Natural Gas Fundamentals

Overall supply averaged 96.6 Bcf/d last week as production declined by 0.5% and average net imports from Canada decreased by 12%. Total demand fell by 3.8% from the prior report week with both industrial consumption and power generation down 1.1% and 1.9%, respectively. Residential-commercial consumption also declined by 8.5%, averaging 20.1 Bcf/d. Exports to Mexico increased by 2.7% while LNG exports decreased from last week, down 2 LNG vessels to 11 with a combined carrying capacity of 39 Bcf. The daily rig count fell by 38 from last week, down 11.0% to 415. Natural gas specific rigs fell to 85 on April 21, the lowest number since August 2016.

 

2. COVID-19 Energy Demand Impact

While nationwide stay-at-home orders reduced energy consumption drastically, the impact on natural gas demand was not as pronounced as the effect on electricity consumption. When compared to the same week last year, overall natural gas demand is up nearly 3%, averaging 82.5 Bcf/d, largely due to LNG exports which are up more than 54%. U.S. consumption is down less than 0.5% from the same week last year with use for power generation down 0.5 Bcf/d and industrial demand reduced by 2.0 Bcf/d. Residential-commercial consumption is up by 2.1 Bcf/d from the same week last year, in part, from increased heating demand with 52 more heating degree days over last year at this time.

Last week, the PUCO reported Ohio weather-normalized electricity consumption is 11% below the 5-year average. Elsewhere, “Full lockdowns have pushed down electricity demand by 20% or more, with lesser impacts from partial lockdowns. Electricity demand is set to decline by 5% in 2020, the largest drop since the Great Depression in the 1930s,” according to a new report by the IEA.

 

3. Drilling Activity

Well closures prompted by historically low oil prices mean less associated gas production. Some analysts believe the reduction may reach as much as 40%. The Wall Street Journal reported, “When crude prices dipped below $0, natural gas prices had their best day in more than a year, popping 9.75% on the prospect that many money-losing wells will be capped. Hedge funds and other speculators last week were net long—with more wagers on rising gas prices than bets counting on decline—for the first time since last May, according to Commodity Futures Trading Commission data.”

“Natural gas futures for June delivery closed up 4.3% to $1.949 per million British thermal units Thursday. On Friday it climbed to $2.016 in early trading before falling back. That’s still too low for many gas wells to be profitable. But it’s up 30% from the 25-year-low of $1.552 on April 2 and the trend is higher heading into summer, when there’s demand to power air conditioners, and more so in winter, when a lot of gas is burned for heat. Futures for July delivery reached $2.25 Friday. December gas nosed above $3.”

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Natural Gas Storage Summary

For natural gas report week, April 23, 2020, the EIA reported a net increase in storage of 43 Bcf, in line with forecasts of injections ranging from 11 Bcf to 51 Bcf and averaging 45 Bcf. Last year for the same week there was an injection of 92 Bcf and the five-year average is an injection of 49 Bcf.

Working gas in storage was 2,140 Bcf as of Friday, April 17th, 2020 per EIA estimates. Inventory was reported at 827 Bcf (63.0%) higher than last year for the same week and 364 Bcf (20.5%) more than the five-year average of 1,776 Bcf.

Natural Gas Market Recap

May NYMEX graph for natural gas April 23 2020 report

Settled Thursday at $1.815/Dth down 12.4 cents from Wednesday’s close at $1.939/Dth.

12 month strip for natural gas April 23 2020 report

Settled Thursday at $2.483/Dth, up 12.7 cents from the prior week.

seasonal strips graph for natural gas April 23 2020 report

The summer strip (MAY20-OCT20) settled Thursday at $2.137/Dth, up 12.7 cents from the week prior. The winter strip (NOV20-MAR21) settled at $2.881/Dth, up 13.5 cents from last week.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – April 23, 2020

 

1. Natural Gas Fundamentals

Overall supply averaged 97.6 Bcf/d last week as production remained unchanged at 92.5 Bcf/d. Average net imports from Canada decreased by 6%. Total demand fell by 3% from the prior report week with both industrial consumption and power generation down 3% and 6%, respectively. Residential-commercial remained steady, averaging 22.1 Bcf/d.

Exports to Mexico increased by 3% while LNG exports decreased from last week, down 4 LNG vessels to 13 with a combined carrying capacity of 48 Bcf. Of note, China received its first U.S. LNG shipment in more than a year after tariff exemptions made the shipment more cost effective. At the same time, overall demand is down roughly 7% from last year. LNG exports have likewise dropped, with more than a dozen shipments canceled so far this year and another two-dozen expected by June.

 

2. Natural Gas Prices 

With production steady and storage at a sizable surplus to the five-year average and given evaporating demand in the wake of COVID-19, anticipation of continued low prices would have been reasonable. Yet this week, spot prices rose in most locations. Likewise, prompt month as well as the 12-month, winter, and summer strips were each up more than 12.0 cents from last week.

Current prices for the upcoming winter increase from $2.342 in October 2020 to $3.012 in January 2021. The shift reflects market sentiment that the supply/demand balance will tighten leading up to and through winter. Those expectations are rooted in declines in drilling activity that’s been prompted by low prices.

 

3. Natural Gas Drilling Activity

According to Enverus, the daily rig count declined 11% from the prior week, down to 453. As of this week, that’s a 40% decline from last month and a 55% drop, year-over-year. The EIA expects this will result in almost a 5.0 Bcf/d drop in 2020 production levels from 2019 before picking up pace again in the second half of 2021.

The Houston Chronicle reported, “For the first time in more than a decade, U.S. natural gas is set to be the world’s most expensive as Covid-19 lockdowns wallop demand in other regions. Gas futures in the U.S. have rallied about 10% this month as traders bet that a historic crash in oil prices will drive American shale companies to halt more drilling and curb output of gas, which is extracted as a byproduct. In Europe and Asia, meanwhile, prices are sliding to fresh lows due to a supply glut and languishing consumption amid the pandemic.”

As we reported last week, current indicators are signaling a spike in natural gas prices for the start of winter. Given the economic strain introduced by COVID-19, it may be time to reassess your risk tolerance and make a plan in advance of seasonal volatility. We’re here to help.

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Natural Gas Storage Summary

For natural gas report week, April 16, 2020, the EIA reported a net increase in storage of 73 Bcf, in line with forecasts of injections ranging from 39 Bcf to 78 Bcf. Last year for the same week there was an injection of 73 Bcf and the five-year average is an injection of 27 Bcf.

Working gas in storage was 2,097 Bcf as of Friday, April 10th, 2020 per EIA estimates. Inventory was reported at 876 Bcf (71.7%) higher than last year for the same week and 370 Bcf (21.4%) more than the five-year average of 1,727 Bcf.

Natural Gas Market Recap

May NYMEX graph for natural gas April 16 2020 report

Settled Thursday at $1.686/Dth up 8.8 cents from Wednesday’s close at $1.598/Dth.

12 month strip for natural gas April 16 2020 report

Settled Thursday at $2.356/Dth, down less than a penny from the prior week.

seasonal strips graph for natural gas April 16 2020 report

The summer strip (MAY20-OCT20) settled Thursday at $2.010/Dth, down 1.6 cents from the week
prior. The winter strip (NOV20-MAR21) settled at $2.746/Dth, up less than a penny from last week.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – April 16, 2020

 

1. Natural Gas Fundamentals

Overall supply averaged 98.3 Bcf/d last week as production remained unchanged and average net imports from Canada increased by 18%. Total demand increased by 3% from the prior report week with residential-commercial up by 9% due to cooler temperatures. Consumption for power generation and industrial demand remained the same as the prior week, averaging 25.9 Bcf/d and 20.8 Bcf/d, respectively. Exports to Mexico fell by 8% while LNG exports increased from last week, up to 17 LNG vessels with a combined carrying capacity of 61 Bcf.

 

2. Natural Gas Prices 

Analysts are suggesting that the convergence of factors may yield a spike in natural gas prices. Low crude oil prices have prompted production cuts which will mean lower associated natural gas production. Additional cuts to natural gas production throughout the summer, as forecast by the EIA, may collide with post-virus demand stabilization in approach of winter resulting in higher prices.

 

3. A Look Back at Natural Gas Withdrawal Season

According to the EIA, withdrawal season concluded with 2008 Bcf in storage – 19% above than the five-year average. The EIA attributes the higher inventory level to strong production coupled with weak heating demand. While increases in both LNG exports and power burn exceeded the declines in heating related demand, the growth was insufficient to offset record-setting production rates.

Looking forward, the EIA expects production will decline throughout this summer while exports are forecast to grow, resulting in smaller injections. At present, production is 3.0 Bcf/d higher than last year at this time. Early estimates for end-of-season storage totals average 3,904 Bcf which is 185 Bcf above the five-year average and 252 Bcf above last year.

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As you structure your own post-virus business strategy, it’s important to review your natural gas program. Minimize the risk posed by price volatility by capitalizing on today’s historic low rates.

For a free evaluation of your current program, call us at 866-646-7322.

Natural Gas Storage Summary

For natural gas report week, April 8, 2020, the EIA reported a net increase in storage of 38 Bcf, exceeding forecasts of injections ranging from 15 Bcf to 33 Bcf. Last year for the same week there was an injection of 25 Bcf and the five-year average is an injection of 6 Bcf.

Working gas in storage was 2,024 Bcf as of Friday, April 3rd, 2020 per EIA estimates. Inventory was reported at 876 Bcf (76.3%) higher than last year for the same week and 324 Bcf (19.1%) more than the five-year average of 1,700 Bcf.

Natural Gas Market Recap

May NYMEX graph for natural gas April 8 2020 report

Settled Wednesday at $1.783/Dth down 6.9 cents from Tuesday’s close at $1.852/Dth.

12 month strip for natural gas April 8 2020 report

Settled Wednesday at $2.346/Dth, up 13.2 cents from the prior week.

seasonal strips graph for natural gas April 8 2020 report

The summer strip (MAY19-OCT19) settled Wednesday at $2.030/Dth, up 16.5 cents from the week prior. The winter strip (NOV19-MAR20) settled Wednesday at $2.705/Dth, up 10.6 cents from last week.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – April 8, 2020

 

1. Natural Gas Fundamentals

Prompt month prices fell in response to this week’s bearish EIA storage report which came in well above last year’s injection and the five-year average. The drop follows a week of gains prompted by possible production cuts. Even though production fell by 1.5 Bcf/d by midweek, it’s still up more than 2.5 Bcf/d over last year. Demand remained steady from last week. The slight increase in power burn was offset by a drop in residential-commercial consumption due to warmer weather across the report week. That trend is expected to reverse as below-normal temperatures are expected for the next two weeks. Declining production and lower temperatures will likely yield bullish storage numbers through the end of April. That may give prompt month prices some support.

 

2. Higher Natural Gas Prices On The Horizon?

A recent report by Forbes indicates higher natural gas prices are likely by the end of 2020. “American producers’ response to low crude prices, including shutting in uneconomic wells and slashing drilling capital budgets by 30 percent and even 50 percent, will have a dramatic effect on domestic natural gas output as well as oil. Roughly 40 percent of U.S. gas production is so-called ‘associated gas,’ a byproduct of drilling for oil.” With expectations for natural gas production cuts by as much as 6 Bcf/d, gas markets could “go from being long during the summer months to being very short by the winter of 2020-2021.” Analysts suggest natural gas
prices could double by winter. This would stabilize America’s oil and gas industry which supports 4.5 million jobs for independent producers alone.

The currently backwardated market hints at the credibility of this forecast with 2021 calendar strips outpricing 2023. With a tentative ceasefire called in the Saudi-Russia oil war, the reduction of 20 million barrels of oil per day will alleviate immediate storage concerns. Nonetheless, the drop is unlikely to provide significant help for a heavily oversupplied market amid obliterated demand. To this end, production cuts are expected to continue.

 

3. Drastic Declines in Electricity Demand a Harbinger of Recession?

The New York Times examined the correlation between declines in electricity consumption and economic downturn. They asserted, “New data on electricity use in the past three weeks suggest a sharp decline in U.S. economic activity on par with that of the Great Recession. It may already be the deepest downturn since the Great Depression; it is certainly the fastest.” While the comparison is, in part, informed by history, recent history hasn’t experienced anything like the current pandemic. You can read the entire article here.

Independent of precise economic impact, declining demand for electricity may mean more trouble for an
oversupplied natural gas market. Outpacing coal and nuclear, a significant amount of natural gas is absorbed for electricity generation.

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Natural Gas Storage Summary

For natural gas report week, April 2, 2020, the EIA reported a net decrease in storage of 19 Bcf, in line with projections ranging from a withdrawal of 10 Bcf to a draw of 35 Bcf. Last year for the same week there was a injection of 6 Bcf and the five-year average is a withdrawal of 19 Bcf.

Working gas in storage was 1,986 Bcf as of Friday, March 27th, 2020 per EIA estimates. Inventory was reported at 863 Bcf (76.8%) higher than last year for the same week and 292 Bcf (17.2%) more than the five year average of 1,694 Bcf.

Natural Gas Market Recap

May NYMEX graph for natural gas April 2 2020 report

April NYMEX: Moved off the board Friday, March 27th, settling the month at $1.634/Dth.

May NYMEX: Settled Thursday at $1.672/Dth down 4.0 cents from Wednesday’s close at $1.712/Dth.

12 month strip for natural gas April 2 2020 report

Settled Thursday at $2.196/Dth, up 3.5 cents from last Thursday.

seasonal strips graph for natural gas April 2 2020 report

The summer diminishing strip (MAY20-OCT20) settled Thursday at $1.828/Dth, down 4.9 cents from the prior week. The winter forward strip (NOV20-MAR21) settled Thursday at $2.601/Dth, up 4.3 cents from last Thursday.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – April 2, 2020

 

1. Natural Gas Fundamentals

Overall supply averaged 97.5 Bcf/d last week as production remained unchanged and average net imports from Canada decreased by 14% due to declining imports into upstate New York. Total demand fell by 7% from the prior report week with power-generation and industrial consumption both down by 7% and 4%, respectively. Residential/commercial consumption dropped by 10% while exports to Mexico fell by 2%. LNG exports increased from last week, down to 19 (+4) LNG vessels with a combined carrying capacity of 70 Bcf (+15 Bcf). The rig count continued to drop week-over-week down from 739 to 652.

 

2. Natural Gas Prices 

Generally prices, from prompt month trading to spot prices, fell across the report week although not dramatically. While still assessing the impact of orders that have nearly 94% of Americans at home and an oil trade dispute between Russian and Saudi Arabia, the lack of immediate clarity leaves little clear direction for market expectations. Even as COVID-19 financial implications threaten market stability, oil prices grew this week in response to President Trump’s Twitter announcement of a possible cooperative effort between Russia and Saudi Arabia to scale back oil production. The suggestion offered some hope of stability for oil and gas prices.

3. COVID-19 Resources

This week Ohio extended the Stay at Home order which will now remain in place through Friday, May 1 or until lifted or otherwise amended. We will continue to comply with this order while continuing to deliver full account support remotely.

Those in need of economic support during this time can find help through a variety of resources found on the Ohio Department of Health website here.

The Small Business Association has also developed guidance on the financial resources available to businesses. That can be found here.

Finally, there are several new scams targeting individuals and businesses alike. Please protect yourself and your business – familiarize yourself with common scams and report suspicious activity to the Ohio Attorney General. You can find that information here. As always, we are here to help.

Please contact us at (866) 646-7322 with your questions or concerns.

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Natural Gas Storage Summary

For natural gas report week, March 26, 2020, the EIA reported a net decrease in storage of 29 Bcf, in line with projections ranging from a withdrawal of 14 Bcf to a draw of 36 Bcf. Last year for the same week there was a withdrawal of 39 Bcf and the five-year average is a withdrawal of 40 Bcf.

Working gas in storage was 2,005 Bcf as of Friday, March 20th, 2020 per EIA estimates. Inventory was reported at 888 Bcf (79.5%) higher than last year for the same week and 292 Bcf (17.0%) more than the five-year average of 1,713 Bcf.

Natural Gas Market Recap

April NYMEX graph for natural gas March 26 2020 report

Settled Thursday at $1.637/Dth, down 2.2 cents from Wednesday’s close at $1.659/Dth.

12 month strip for natural gas March 26 2020 report

Settled Thursday at $2.161/Dth, up 1.2 cents from last Thursday.

seasonal strips graph for natural gas March 26 2020 report

The summer diminishing strip (APR20-OCT20) settled Thursday at $1.877/Dth, down 1.3 cents from the prior week. The winter forward strip (NOV20-MAR21) settled Thursday at $2.558/Dth, up 4.7 cents from last Thursday.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – March 26, 2020

 

1. Natural Gas Fundamentals

Overall supply averaged 98.9 Bcf/d last week as production remained unchanged and average net imports from Canada increased by 6%.

Total demand fell by 1% from the prior report week with power-generation and industrial consumption both down by 2%. Residential/commercial consumption remained the same as the prior week while exports to Mexico grew by 1%. LNG exports decreased from last week, down to 15 LNG vessels with a combined carrying capacity of 55 Bcf.

With five days left in withdrawal season, the average rate of withdrawal is 13% less than the five-year average. If the rate of withdrawal from storage matched the five-year average of 1.4 Bcf/d from now until March 31, storage inventory would be 1,989 Bcf which is 292 Bcf higher than the five-year average of 1,697 Bcf.

 

2. Natural Gas Prices 

With jobless claims in excess of 3.3 million and 160 million people – almost half of the U.S. population – under orders to stay at home, schools have transitioned to online learning and many businesses have temporarily closed. According to Forbes, “Gasoline demand is set to plunge 50%, while jet fuel consumption has all but evaporated, with 87% fewer flyers taking to the air than a year ago.” In addition to billions in capital budget cuts, producers are cutting drilling rigs. That means less associated natural gas.

The changes brought about by COVID-19 also mean industrial and commercial natural gas demand will drop substantially. With short term temperature forecasts predicting mild temperatures, it’s unlikely to be cold enough to spark residential heating demand and not hot enough to prompt growth in power burn consumption. How the exact impact on demand will unfold has yet to be seen. Next week will begin to offer a clearer understanding.

Supply fundamentals aren’t immediately clear either, but last week’s decline in rig counts from 802 to 739 indicates producers aren’t wasting any time in cutting rigs.

So while the market almost seems to be holding it’s breath waiting for clarity, significant cuts in demand will push prices lower short-term, but could mean price inflation as the world attempts to return to normal in the wake of COVID-19.

 

3. AES COVID-19 Operational Update

This week Ohio announced implementation of a Stay at Home order which will remain in place through Monday, April 6 or until lifted or otherwise amended. In compliance with this mandate and to continue prioritizing the health of our employees, customers, and communities we have transitioned operations consistent with the contingency plan we informed you about last week. During this time, we will continue to deliver full account support remotely. This change has proceeded with imperceptible impact to our customers and supplier network.

As always, we are here to help. Please call us at (866) 646-7322 with your questions or concerns

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Natural Gas Storage Summary

For natural gas report week, March 19, 2020, the EIA reported a net decrease in storage of 9 Bcf, in line with projections ranging from a withdrawal of 14 Bcf to an injection of 7 Bcf. Last year for the same week there was a withdrawal of 91 Bcf and the five-year average is a withdrawal of 63 Bcf.

Working gas in storage was 2,034 Bcf as of Friday, March 13th, 2020 per EIA estimates. Inventory was reported at 878 Bcf (76.0%) higher than last year for the same week and 281 Bcf (16.0%) more than the five-year average of 1,753 Bcf.

Natural Gas Market Recap

April NYMEX graph for natural gas March 19 2020 report

Settled Thursday at $1.654/Dth up 5.0 cents from Wednesday’s close at $1.604/Dth.

12 month strip for natural gas March 19 2020 report

Settled Thursday at $2.149/Dth, down 7.3 cents from last Thursday.

seasonal strips graph for natural gas March 19 2020 report

The summer diminishing strip (APR20-OCT20) settled Thursday at $1.890/Dth, down 13.0 cents from the prior week. The winter forward strip (NOV20-MAR21) settled Thursday at $2.511/Dth, down less than a penny from last Thursday.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – March 19, 2020

 

1. Natural Gas Fundamentals

Overall supply averaged 99.0 Bcf/d last week with production up 1% and average net imports from Canada
increased by 12%. Total demand increased by 3% from the prior report week with power-generation and industrial consumption up by 8% and 1%, respectively. Residential/commercial consumption fell by 1% while exports to Mexico grew by 1%. LNG exports increased over last week, up to 16 LNG vessels with a combined carrying capacity of 59 Bcf.

With one week left in withdrawal season, the average rate of withdrawal is 13% less than the five-year average. If the rate of withdrawal from storage matched the five-year average of 3.1 Bcf/d from now until March 31, storage inventory would be 1,978 Bcf which is 281 Bcf higher than the five-year average of 1,697 Bcf.

2. Natural Gas Prices 

Prompt month prices fell nearly 20.0 cents from last week while calendar strips hit new lows. Crude oil ended the week “down 10.7% at $22.53 a barrel. It closed the week with a massive 29% slide, its biggest one-week percentage decline since January 1991. Brent, the global gauge of prices, dropped 20% for the week to $26.98 a barrel,” according to a report by the Wall Street Journal. When the federal government’s announcement of their intention to purchase oil for the Strategic Petroleum Reserve failed to reverse the slide, reports surfaced claiming the U.S may attempt to intervene in the Saudi-Russia oil war. With oversupply impacting crude oil prices, analysts expect decreased oil production may eventually lead to cuts in natural gas supply.

However, as heating season wanes and the impact of COVID-19 closures on declining commercial and industrial demand begin to take shape, the market could see further price declines despite associated natural gas supply concerns.

As producers haven’t yet signaled cuts to production and the full impact to demand is uncertain, the market direction is ultimately another unknown. We will continue to monitor fundamentals and communicate possible impacts to prices.

 

3. AES Operational Note

As our businesses confront evolving community health needs and navigate the resulting impacts to the way we conduct business, we are working to ensure the health of our employees and our customers. To this end, in-person business meetings have been replaced with web conferencing and phone meetings. At the same time, we understand the impact uncertainty has on business and want you to know we are here to answer any questions you have about the market or your specific energy program.

We invite you to reach out with your questions and concerns

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Natural Gas Storage Summary

For natural gas report week, March 12, 2020, the EIA reported a net decrease in storage of 48 Bcf, in line with projections ranging from a withdrawal of 45 Bcf to a draw of 66 Bcf. Last year for the same week there was a withdrawal of 164 Bcf and the five-year average is a withdrawal of 99 Bcf.

Working gas in storage was 2,043 Bcf as of Friday, March 6th, 2020 per EIA estimates. Inventory was reported at 796 Bcf (63.8%) higher than last year for the same week and 227 Bcf (12.5%) more than the five-year average of 1,816 Bcf.

Natural Gas Market Recap

April NYMEX graph for natural gas March 12 2020 report

Settled Thursday at $1.841/Dth down 3.7 cents from Wednesday’s close at $1.878/Dth.

12 month strip for natural gas March 12 2020 report

Settled Thursday at $2.222/Dth, up 10.4 cents from last Thursday.

seasonal strips graph for natural gas March 12 2020 report

The summer diminishing strip (APR20-OCT20) settled Thursday at $2.020/Dth, up 9.7 cents from the
prior week. The winter forward strip (NOV20- MAR21) settled Thursday at $2.506/Dth, up 11.5 cents from last
Thursday.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – March 12, 2020

 

1. Fundamentals

Overall supply averaged 98.1 Bcf/d last week, down 1.3 Bcf/d from the prior week. Production remained
unchanged while average net imports from Canada fell by 20%. Total demand dropped by 10% from the prior report week. Residential/commercial consumption and power-generation down by 20% and 6%, respectively. Industrial consumption fell by 2% while exports to Mexico were unchanged. LNG exports decreased over last week, down to 14 LNG vessels with a combined carrying capacity of 51 Bcf.

So far this withdrawal season, the average rate of withdrawal is 10% less than the five-year average. If the rate of withdrawal from storage matched the five-year average of 4.7 Bcf/d from now until March 31, storage inventory would be 1,924 Bcf which is 227 Bcf higher than the five-year average of 1,697 Bcf.

 

2. Important Trends 

While the coronavirus simultaneously drove both volatile market response and frenzied news cycles across the last week, Russia’s refusal of OPEC proposed crude oil production cuts caused a chain reaction of events that added to the ongoing economic strain. Following collapse of negotiations, Saudi Arabia stated their intention to cut oil prices and escalate production. Russia then responded with similar intentions. Then global oil prices fell to their lowest level since February 2016, at the fastest rate in three decades.

That may seem like a great thing for consumers, but it’s not for U.S. oil producers who help make America one of the world’s largest producers of oil. With other major oil producers following the Saudi example and coronavirus-related consumption declines exacting their own toll (compounded by waves of activity and travel cancellations), prices have continued to falter.

Prices remain well below breakeven for producers. With little end in sight for oversupply and subdued demand, it’s likely producers will increasingly turn to production cuts as a follow up to capital spending reductions. Such financial measures have already been taken by Occidental Petroleum and Marathon Oil. Since it’s unlikely producers will shut existing wells, production cuts won’t be realized until the end of 2020 and into 2021.

When it comes to natural gas this matters because a portion of natural gas production is associated gas, or gas that comes from oil wells. Fewer wells will mean lower associated gas production which in turn means lower supply. So for now, production remains steady, but tightening natural gas supply toward the end of 2020 may give prices a boost.

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Natural Gas Storage Summary

For natural gas report week, March 5, 2020, the EIA reported a net decrease in storage of 109 Bcf, in line with projections ranging from a withdrawal of 96 Bcf to a draw of 117 Bcf. Last year for the same week there was a withdrawal of 152 Bcf and the five-year average is a withdrawal of 106 Bcf.

Working gas in storage was 2,091 Bcf as of Friday, February 28th, 2020 per EIA estimates. Inventory was reported at 680 Bcf (48.2%) higher than last year for the same week and 176 Bcf (9.2%) more than the five-year average of 1,915 Bcf.

Natural Gas Market Recap

April NYMEX graph for natural gas March 5 2020 report

Settled Thursday at $1.772/Dth down 5.5 cents from Wednesday’s close at $1.827/Dth.

12 month strip for natural gas March 5 2020 report

Settled Thursday at $2.118/Dth, up less than a penny from last Thursday.

seasonal strips graph for natural gas March 5 2020 report

The summer diminishing strip (APR20-OCT20) settled Thursday at $1.923/Dth, up less than a penny
from the prior week.

The winter forward strip (NOV20-MAR21) settled Thursday at $2.391/Dth, down less than a penny
from last Thursday.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – March 5, 2020

 

1. Fundamentals

Overall supply averaged 99.4 Bcf/d last week with production unchanged and average net
imports from Canada down by 11%. Total demand dropped by 8% from the prior report week with residential/commercial consumption and power generation down by 14% and 4%, respectively. Industrial consumption fell by 2% while exports to Mexico grew by 3%. LNG exports decreased over last week, down to 15 LNG vessels with a combined carrying capacity of 53 Bcf. So far this withdrawal season, the average rate of withdrawal is 8% less than the five-year average. If the rate of withdrawal from storage matched the five-year average of 6.8 Bcf/d from now until March 31, storage inventory would be 1,873 Bcf which is 176 Bcf higher than the five-year average of 1,697 Bcf.

 

2. Important Ohio Energy News 

According to a new report by Energy News Network, the effort to pass Ohio HB6 and subsequently prevent the legislation from reaching Ohio voters for consideration was orchestrated by dark money groups. Those groups made over $1 million in campaign contributions to push HB6 through the Ohio General Assembly. Following passage of HB6, they also dumped millions into “misleading ads, alleged harassment of signature collectors, buyouts of petition workers, and even alleged assault,” all aimed at preventing Ohioans from voting on the legislation.

The coordinated effort leaves Ohio ratepayers responsible for paying nearly $1 billion to bail out two of the
bankrupt generator’s nuclear power plants with additional funds set aside for two of their coal plants.

The exact same set of players are also involved in additional legislation before Ohio lawmakers. Consumer groups have argued against HB247, arguing it would strangle the competitive market in Ohio, meaning higher rates for consumers.

Utilities could also charge ratepayers for infrastructure improvements in the name of economic development,
whether or not it would be useful. The legislation would allow utilities to spend “unlimited amounts of money on risky projects with little or no oversight, and no recourse.”

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Natural Gas Storage Summary

For natural gas report week, February 27, 2020, the EIA reported a net decrease in storage of 143 Bcf, in line with projections ranging from a withdrawal of 140 Bcf to a draw of 167 Bcf. Last year for the same week there was a withdrawal of 167 Bcf and the five-year average is a withdrawal of 122 Bcf.

Working gas in storage was 2,200 Bcf as of Friday, February 21st, 2020 per EIA estimates. Inventory was reported at 637 Bcf (40.8%) higher than last year for the same week and 179 Bcf (8.9%) more than the five-year average of 2,021 Bcf.

Natural Gas Market Recap

April NYMEX graph for natural gas February 27 2020 report

March moved off the board Wednesday, February 26th, settling the month at $1.821/Dth.
April settled Thursday at $1.752/Dth down 8.5 cents from Wednesday’s close at $1.837/Dth.

12 month strip for natural gas February 27 2020 report

Settled Thursday at $2.114/Dth, down 6.8 cents from last Thursday.

seasonal strips graph for natural gas February 27 2020 report

The summer diminishing strip (APR20-OCT20) settled Thursday at $1.914/Dth, down 14.5 cents from
the prior week.

The winter forward strip (NOV20-MAR21) settled Thursday at $2.394/Dth, down 6.5 cents from last
Thursday.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – February 27, 2020

 

1. Fundamentals

Overall supply averaged 100.0 Bcf/d last week with production unchanged and average net imports from Canada down by 7%. Despite week-over-week numbers showing production has been consistently flat, it’s up 5.1 Bcf/day over last year has and averaged 91.5 Bcf/d so far this month. Total demand dropped by 4% from the prior report week with residential/commercial consumption and power-generation down by 8% and 3%, respectively. Industrial consumption grew by 2% while exports to Mexico remained the same at 5.4 Bcf/d week-over-week.

So far this withdrawal season, the average rate of withdrawal is 9% less than the five-year average. If the rate of withdrawal from storage matched the five-year average of 8.3 Bcf/d from now until March 31, storage inventory would be 1,876 Bcf which is 179 Bcf higher than the five-year average of 1,697 Bcf.

2. Important Trends 

More than 83,000 cases of coronavirus have been confirmed in more than 50 countries as global disruption to businesses and economies has impacted American markets throughout the last week.

Natural gas markets have not been immune to the impact as China National Offshore Oil Corp. (CNOOC), China’s largest LNG importer suspended contracts with suppliers and made a legal move to nullify other contractual obligations, leaving many shipping vessels afloat while they search for other buyers.

Chevron sent home 300 workers in London over coronavirus fears when an employee returned to work following a trip to Italy and began feeling ill. Other companies have also furloughed employees which may disrupt natural gas supply and demand.

Amid declining demand, oil prices are notably lower at $45 a barrel. The NYT reports that’s the break-even price for many producers who don’t yet have immediate plans to curtail drilling, a move that would translate to reduced associated natural gas production.

 

3. Prices

As the trading calendar flips to April 2020, the first month of the diminishing summer strip, there’s an awareness that the time for winter’s last hurrah for this withdrawal season is at hand. This was reaffirmed by forecasts predicting temperatures in excess of the ten-year norm for the majority of the country.

Haven’t cleared the driveway from this week’s snow? Not to worry, cities from Chicago to Baltimore will see temperatures in the 50s and 60s next week. While that might help clear your walkway, it’s certainly no help when it comes to natural gas prices which fell uniformly across the report week. Spot, prompt month, calendar, and seasonal strip prices all declined across the report week. By current circumstances, voluntary production declines are more likely to help prices than other fundamentals.

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Natural Gas Storage Summary

For natural gas report week, February 20, 2020, the EIA reported a net decrease in storage of 151 Bcf, in line with projections ranging from a withdrawal of 128 Bcf to a draw of 158 Bcf. Last year for the same week there was a withdrawal of 163 Bcf and the five-year average is a withdrawal of 136 Bcf.

Working gas in storage was 2,343 Bcf as of Friday, February 14th, 2020 per EIA estimates. Inventory was reported at 613 Bcf (35.4%) higher than last year for the same week and 200 Bcf (9.3%) more than the five-year average of 2,143 Bcf.

Natural Gas Market Recap

March NYMEX graph for natural gas February 20 2020 report

Settled Thursday at $1.920/Dth down 3.5 cents from Wednesday’s close at $1.955/Dth.

12 month strip for natural gas February 20 2020 report

Settled Thursday at $2.182/Dth, up 3.0 cents from last Thursday.

seasonal strips graph for natural gas February 13 2020 report

The summer forward strip (APR20-OCT20) settled Thursday at $2.019/Dth, down 1.4 cents from the prior week. The winter forward strip (NOV20-MAR21) settled Thursday at $2.465/Dth, up 2.8 cents from last Thursday.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – February 20, 2020

 

1. Fundamentals

Overall supply averaged 100.4 Bcf/d last week with production remaining steady and average net imports from Canada increasing by 7%. Total demand increased by 5% from the prior report week with residential/commercial consumption up 7%, industrial up by 1% and exports to Mexico up by 3% while power-generation fell by 1%.

Overall prices rose in response to chilly (normal) winter temperatures.

So far this withdrawal season, the average rate of withdrawal is 11% less than the five-year average. If the rate of withdrawal from storage matched the five-year average of 9.7 Bcf/d from now until March 31, storage inventory would be 1,897 Bcf which is 200 Bcf higher than the five-year average of 1,697 Bcf.

2. Important Trends 

Last week we examined global LNG oversupply conditions and the extent to which watching LNG
contracts may serve as an indicator of declining export market opportunities. As of last week, conditions appeared optimistic as the issue hadn’t led to contract cancellations or requested re-negotiations for most exporters. This week, that changed as a Spanish utility was among the first to reportedly retreat from a prior LNG commitment.

The cancellation supports claims made at last week’s 19th annual S&P Global Platts LNG Conference. “LNG producers were encouraged…to shut in some supply amid the global glut that is helping drive down prices in Asia, or push more volumes to markets beyond Europe, perhaps Latin America. The takeaway…was that something has to give, and soon, to allow for more liquefaction projects to be built in time to fill a projected supply shortage around the middle of the decade.”

While Europe represented a promising LNG market, current excess supply means shippers will need to find new takers for LNG exports. Brazil may be one Latin American opportunity, but it’s unlikely they can absorb enough LNG to reverse current oversupply conditions.

 

3. Why It Matters

Absent shutting off supply to tighten up the supply-demand imbalance, current conditions will continue to exert downward pressure on prices. With prices so low, developers have struggled to secure enough long-term contracts to finance construction of new terminals previously scheduled to start around the middle of the decade. In the interim, some have delayed investment decisions. As the LNG market rights itself, this could eventually lead to an inability to meet increasing LNG demand as lags in supply infrastructure development hamper suppliers from keeping pace. For now, shortterm gains through shut-ins may produce a more stable market later in the 2020s.

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Natural Gas Storage Summary

For natural gas report week, February 13, 2020, the EIA reported a net decrease in storage of 115 Bcf, in line with projections ranging from a withdrawal of 102 Bcf to a draw of 116 Bcf. Last year for the same week there was a withdrawal of 101 Bcf and the five-year average is a withdrawal of 131 Bcf.

Working gas in storage was 2,494 Bcf as of Friday, February 7th, 2020 per EIA estimates. Inventory was reported at 601 Bcf (31.7%) higher than last year for the same week and 215 Bcf (9.4%) more than the five-year average of 2,279 Bcf.

Natural Gas Market Recap

March NYMEX graph for natural gas February 13 2020 report

Settled Thursday at $1.826/Dth down 1.8 cents from Wednesday’s close at $1.844/Dth.

12 month strip for natural gas February 13 2020 report

Settled Thursday at $2.152/Dth, down less than a penny from last Thursday.

seasonal strips graph for natural gas February 13 2020 report

The summer forward strip (APR20-OCT20) settled Thursday at $2.019/Dth, down 1.4 cents from the prior week. The winter forward strip (NOV20-MAR21) settled Thursday at $2.465/Dth, up 2.8 cents from last Thursday.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – February 13, 2020

 

1. Fundamentals

Overall supply averaged 99.8 Bcf/d last week with production remaining steady and average net imports from Canada increasing by 2%. Despite week-over-week numbers showing production has been consistently flat, it’s up 5.1 Bcf/day over last year has and averaged 92.0 Bcf/d so far this month.

Total demand increased by 5% from the prior report week with residential/commercial consumption up 7%, industrial up by 2%, and power-generation up by 4% while exports to Mexico declined by 3%. So far this withdrawal season, the average rate of withdrawal is 13% less than the five-year average. If the rate of withdrawal from storage matched the five-year average of 11.0 Bcf/d from now until March 31, storage inventory would be 1,912 Bcf which is 215 Bcf higher than the five-year average of 1,697 Bcf.

 

2. Important Trends 

The EIA expects production will average 94.2 Bcf/d in 2020 (up 2% from 2019) while generally
declining throughout 2020, falling from an estimated 95.4 Bcf/d in January to 92.5 Bcf/d in December. The drop would mark the first annual decline in production since 2016.

In 2017, the outlook for LNG exports was promising. The United States had become a net exporter of natural gas and subsequently doubled prior-year totals in 2018 and 2019. Completed pipeline projects added to capacity and robust demand was expected to absorb some excess supply. However, the above-average winter temperatures much of the United States has experienced has been the same story for a large portion of the northern hemisphere which is composed of countries that likewise entered heating season with healthy supply levels. And so the supply glut has become a global issue, leading to low prices in nearly all foreign markets. For U.S. exporters, that could mean prices that make the cost of shipping unprofitable. Declining Asian demand in the wake of the coronavirus may compound the problem. For now, the issue hasn’t led to contract cancellations or requested re-negotiations for most exporters. With contracts scheduled months out, there’s optimism the extra supply won’t further bloat the domestic market in the immediate future. Nonetheless, this remains one to watch.

 

3. Prices

Spot prices generally rose in most locations across the report week in response to short-term forecasts for cooler temperatures. On Monday, March trading settled at $1.766/Dth – the lowest finish since March 2016. While prompt month prices recovered nearly 8 cents by Wednesday, they’ve lost almost 16% so far this year according to MarketWatch. With major natural gas producers showing signs of financial trouble, pressure from investors and economic natural selection (in the form of bankruptcies) will likely prompt declines in production. As the supply-demand balance tightens, expect prices to rebound. The 2023 and 2024 calendar strips show evidence of market confidence in this scenario.

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Natural Gas Storage Summary

For natural gas report week, February 6, 2020, the EIA reported a net decrease in storage of 137 Bcf, just above projections ranging from a withdrawal of 114 Bcf
to a draw of 136 Bcf. Last year for the same week there was a withdrawal of 228 Bcf and the five-year average is a withdrawal of 143 Bcf.

Working gas in storage was 2,609 Bcf as of Friday, January 31st, 2020 per EIA estimates. Inventory was reported at 615 Bcf (30.8%) higher than last year for the same week and 199 Bcf (8.3%) more than the five-year average of 2,410 Bcf.

Natural Gas Market Recap

March NYMEX graph for natural gas February 6, 2020 report

Settled Thursday at $1.862/Dth up less than a penny from Wednesday’s close at $1.861/Dth.

12 month strip graph for natural gas February 6, 2020 report

Settled Thursday at $2.154/Dth, up less than a penny from last Thursday.

seasonal strip graph for natural gas February 6, 2020 report

The summer forward strip (APR20-OCT20) settled Thursday at $2.033/Dth, up less than a penny from the prior week. The winter forward strip (NOV20-MAR21) settled Thursday at $2.437/Dth, up less than a penny from last Thursday.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – February 6, 2020

 

1. Important Trends 

According to NOAA, “January 2020 was the fifth warmest January on record. All 48 contiguous states saw above- to much-above-average temperatures last month.” This has suppressed heating-related demand. Consumption for power generation has been subdued by contributions from nuclear power. The EIA explained, “Although nuclear power plant outages tend to be relatively low in January, this January’s outages have been at multi-year lows for the month, moderating the demand for natural gas-fired generation so far this winter.”

Despite a 40% cut in gas rigs over last year, January 2020 production totals are the third-highest on record, behind November and December 2019. According to the EIA, production has averaged 95.5 Bcf/d since November. At that rate, by the end of March, it would be 7.0 Bcf/d higher than last winter.

That production remains high despite of declining gas rigs affirms that an increasing portion of natural gas production is associated gas, or gas produced through oil wells. With the coronavirus outbreak, Chinese oil consumption has dropped 20% due to travel restrictions. The drop in demand translates to a drop in profits. With energy companies already combating weak earnings by cutting production and exploration, analysts expect investors to push for additional cuts, thereby decreasing associated natural gas production.

 

2. Price Forecast, Why The Trends Matter

As historians are fond of noting, if you want to know where you’re going, you have to know where you’ve been. That’s important because as natural gas prices recently fell below $2.000/Dth for the first time since Spring 2016, it’s a good time to look back at what happened in 2016 after prices fell.

In 1Q 2016, above-average winter temperatures and excess supply led to unseasonable price drops. March futures settled at $1.711 and on March 1st, Henry Hub spot prices fell to $1.570/Dth. Prices gradually increased roughly 70% across late spring due to rising demand and decreasing production. This set the stage for sharp price increases during the 2016-2017 winter when prices spiked more than 130% over the early Spring lows.

 

3. Why it matters

In 2016 oversupply and current market conditions led to cuts in production. Current rig counts are near the 2016 levels that preceded the price spikes. Other global factors allude to production cuts. Whereas current production cuts have, at least in part, been driven by investors demanding profitability, higher prices are a requisite for getting there.

 

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If low prices have you feeling complacent about floating, it’s a good idea to reflect back on 2016 and reconsider. If you’re inclined to wait-and-see, a hedging strategy could reduce your risk while leaving you some flexibility. Want to weigh your options? Give us a call!

Natural Gas Storage Summary

For natural gas report week, January 30, 2020, the EIA reported a net decrease in storage of 201 Bcf, in line with projections ranging from a withdrawal of 180 Bcf to a draw of 225 Bcf. Last year for the same week there was a withdrawal of 171 Bcf and the five-year average is a withdrawal of 143 Bcf.

Working gas in storage was 2,746 Bcf as of Friday, January 24th, 2020 per EIA estimates. Inventory was reported at 524 Bcf (23.6%) higher than last year for the same week and 193 Bcf (7.6%) more than the five-year average of 2,553 Bcf.

Natural Gas Market Recap

March NYMEX for natural gas January 30, 2020 report

February moved off the board Wednesday, January 29th, settling the month at $1.877/Dth.

March settled Thursday at $1.829/Dth down 3.6 cents from Wednesday’s close at $1.865/Dth.

12 month strip for natural gas january 30, 2020 report

Settled Thursday at $2.148/Dth, down 1.3 cents from last Thursday.

seasonal strips for natural gas January 30, 2020 report

The winter strip settled Thursday at $2.431/Dth, down 6.3 cents from
last Thursday.

The summer strip settled Thursday at $2.031/Dth, down 6.6 cents from the prior week.

Natural Gas Weekly - Three Things to Watch

Natural Gas Report – January 30, 2020

 

1. Fundamentals

Overall supply fell by 1% from last week with production remaining steady and average net imports from Canada decreasing by 9 Bcf. Total demand dropped by 10% from the prior report week with residential/commercial down 15% and power generation slipping by 6%. Industrial demand fell by 3% while exports to Mexico grew by 13%.

So far this withdrawal season, the average rate of withdrawal is 14% less than the five-year average. If the rate of withdrawal from storage matched the five-year average of 12.8 Bcf/d from now until March 31, storage inventory would be 1,890 Bcf which is 193 Bcf higher than the five-year average of 1,697 Bcf.

 

2. Weather

According to the Weather Channel, “The heart of winter has passed for most of the United States as February begins.” Both NOAA and Weather Channel February forecasts predict average to above-average temperatures for 2/3 of the United States with winter chill consolidating over the Dakotas, Minnesota, and Iowa.

Throughout January, temperatures averaged 5 degrees more than normal for this time of year with some locations in Ohio and New York reaching as much as 10 degrees above average. This contributed to a 7.1 Bcf/d decline in heating-related demand over last year at this time. It’s also had a chilling effect on prices with February’s settle and the calendar strips setting new low records.

Looking forward to the final month in winter trading, it will likely be more of the same as mild temperatures continue to depress demand, and consequently, prices. If the market is to experience a ninth-inning rally, it will need some help from production cuts. While many major natural gas producers have announced plans to reduce drilling, production rates still exceed last year at this time. It’s possible that any declines might be too little, too late.

 

3. Legislation

Last week, Ohioans Against Corporate Bailouts, the group fighting the legislation subsidizing FirstEnergy Solutions, dropped their appeal seeking more time to collect the signatures necessary to put the measure up for vote on the November ballot. As reported by Cleveland.com, Gene Pierce, a spokesman for the group stated, “’We couldn’t see a path forward. I don’t know what anybody else wants to do, but we’re done.’”

With that fight effectively over, ratepayers must now turn their attention to HB247 which may have more far-reaching consequences than HB6. Stay tuned for more details on HB247 in upcoming reports.

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Natural Gas Storage Summary

For natural gas report week, January, 23, 2020, the EIA reported a net decrease in natural gas storage of 92 Bcf, in line with projections ranging from a withdrawal of 79 Bcf to a draw of 103 Bcf. Last year for the same week there was a withdrawal of 152 Bcf and the five-year average is a withdrawal of 194 Bcf.

Working gas in storage was 2,947 Bcf as of Friday, January 17th, 2020 per EIA estimates. Inventory was reported at 554 Bcf (23.2%) higher than last year for the same week and 251 Bcf (9.3%) more than the five-year average of 2,696 Bcf.

Natural Gas Market Recap

February NYMEX natural gas report January 23 2020
Settled Thursday at $1.926/Dth, up
2.1 cents from Wednesday’s close
at $1.905/Dth.
12 month strip for natural gas January 23 2020 report
Settled Thursday at $2.161/Dth, down 10.8 cents from last Thursday.
Seasonal Strips for natural gas January 23 2020 report
The winter strip settled Thursday at
$2.494/Dth, down 7.7 cents from
last Thursday. The summer strip
settled Thursday at $2.097/Dth,
down 11.0 cents from the prior
week.

Natural Gas Weekly - Three Things To Watch

Natural Gas Report – January 23, 2020

1. Fundamentals

Overall supply grew by 1% from last week. Average net imports from Canada increased by 62% in response to higher heating-related demand during the first half of the week, specifically in the Northeast and Midwest. The weather drove consumption up by 17% with residential/commercial up by 27% and power generation up by 15%. Industrial demand rose 3% while exports to Mexico fell by 7%. So far this withdrawal season, the average rate of withdrawal is 22% less than the five-year average. If the rate of withdrawal from storage matched the five-year average of 13.5 Bcf/d from now until March 31, storage inventory would be 1,948 Bcf which is 251 Bcf higher than the five-year average of 1,697 Bcf.

2. Prices

Henry Hub spot prices fell to $1.89/Dth Wednesday, the lowest January price since 1999. Prompt month and strip prices also fell across the report week as the market confronted national and global oversupply conditions made worse by stunted winter demand impacted by above-average temperatures.

3. A Look Ahead 

It was really just a matter of time. Prompt month prices broke the $2 mark this week, largely in response to excess supply and forecasts signaling warmer temperatures for the next two weeks. It’s good news for those of us who aren’t fans of winter and others who have been waiting to see how low natural gas prices can go. Not in either group? Not to worry, NOAA is also predicting above-average snowfall and average temperatures for February and March…at least in the Midwest.

Not ready to gamble on weather or the market when it comes to natural gas prices?

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Natural Gas Storage Summary

For natural gas report week, January 16, 2020, the EIA reported a net decrease in natural gas storage of 109 Bcf, exceeding projections ranging from a withdrawal of 87 Bcf to a draw of 106 Bcf. Last year for the same week there was a withdrawal of 82 Bcf and the five-year average is a withdrawal of 184 Bcf.

Working gas in storage was 3,039 Bcf as of Friday, January 10th, 2020 per EIA estimates. Inventory was reported at 494 Bcf (19.4%) higher than last year for the same week and 149 Bcf (5.2%) more than the five-year average of 2,890 Bcf.

Natural Gas Market Recap

Settled Thursday at $2.077/Dth
down 4.3 cents from Wednesday’s
close at $2.120/Dth.
Settled Thursday at $2.269/Dth,
down 6.0 cents from last Thursday.
The winter strip (FEB20-MAR20)
settled Thursday at $2.571/Dth,
down 2.5 cents from last Thursday.
The summer strip (APR20-OCT20)
settled Thursday at $2.207/Dth,
down 6.2 cents from the prior week.

Natural Gas Weekly - Three Things To Watch

Natural Gas Report – January 16, 2020

1. Fundamentals 

Overall natural gas demand dropped by 3% from last week with residential/commercial, power generation, and industrial declining 4%, 3%, and 1%, respectively. Exports to Mexico increased 5% while LNG exports declined slightly from last week. Total supply fell by 1% as production generally remained consistent and imports from Canada decreased by 25% on lower Midwest and Northeast demand.

Comparatively, residential/commercial is down 6.9 Bcf/d thus far into January 2020 compared to January last year. Production has averaged 92.1 Bcf/d for January 2020, up 4.3 Bcf/d from January 2019.

So far this withdrawal season, the average rate of withdrawal is 15% less than the five-year average. If the rate of withdrawal from storage matched the five-year average of 14.7 Bcf/d from now until March 31, storage inventory would be 1,846 Bcf on March 31 which is 149 Bcf higher than the five-year average of 1,697 Bcf.

 

2. Prices 

Despite a larger-than-expected storage draw posted Thursday, natural gas prices looked past short-term wintry weather to longer-term, above-average temperatures forecast through the end of January. Hours after the EIA posted their weekly storage numbers, NYMEX prompt month trading started to challenge the $2 mark. The Henry Hub spot price fell to $1.98/Dth Wednesday, the lowest spot price since April 2016 and the lowest spot price for Henry Hub in January trading since 1999. Elsewhere, spot prices remained a reflection of temperatures. Above-average temperatures put downward pressure on prices and areas of cold and snow generally brought increases, albeit temporary, in spot prices.

 

3. A Look Ahead 

The EIA’s most recent Short Term Energy Outlook provided two-year forecasts including expectations that natural gas production will average 94.7 Bcf/d through 2020 before leveling off at 94.1 Bcf/d in 2021. The EIA anticipates exports (both pipeline and LNG) will average 7.3 Bcf/d in 2020 and 8.9 Bcf/d in 2021, a 3.6 Bcf/d increase from 2019.

Power generation related demand is expected to remain steady, 37% in 2019, 38% in 2020, and 37% in 2021. The contribution from renewables is projected to grow from 17% in 2019 to 22% in 2021. Conversely, coal’s share of electricity generation is expected to fall from 24% in 2019 to 21% in 2021. Nuclear generation is forecasted to drop slightly to less than 20% by 2021, the result of reactor retirements.

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Natural Gas Storage Summary

For the natural gas report week, January 9, 2020, the EIA reported a net decrease in natural gas storage of 44 Bcf, near the low end of projections ranging from a withdrawal of 40 Bcf to a draw of 62 Bcf. Last year for the same week there was a withdrawal of 81 Bcf and the five-year average is a withdrawal of 156 Bcf.

Working gas in storage was 3,148 Bcf as of Friday, January 3rd, 2020 per EIA estimates. Inventory was reported at 521 Bcf (19.8%) higher than last year for the same week and 74 Bcf (2.4%) more than the five-year average of 3,074 Bcf.

Natural Gas Market Recap

February natural gas January 9 2020 nymex market graph.
February settled Thursday at
$2.166/Dth up 2.5 cents from Wednesday’s close at $2.141/Dth.
12 month strip natural gas January 9 2020 nymex market graph.
Settled Thursday at $2.329/Dth, up 3.9 cents from last Thursday.
Seasonal strips natural gas January 9 2020 nymex market graph.
The winter strip (FEB20-MAR20)
settled Thursday at $2.596/Dth, up 1.9 cents from last Thursday. The
summer strip (APR20-OCT20) settled Thursday at $2.269/Dth, up 4.4 cents from the prior week.

Natural Gas Weekly - Three Things To Watch

Natural Gas Report – January 9, 2020

1. Fundamentals

Overall consumption grew by 10% (from 84.8 Bcf/d to 93.5 Bcf/d) week-over-week, largely the result of typical winter temperatures. Heating demand led U.S. consumption in weekly growth as residential/commercial increased by 15%, followed by power generation (11%), and industrial (2%). Exports to Mexico increased 16% from the prior week. LNG exports also grew as 19 ships with a combined capacity of 68 Bcf departed the United States. Forecasts for LNG exports anticipate an average 8.25 Bcf/d of through January 2020 which nearly doubles 2018. That rate is expected to drop significantly into the latter half of 2020 as global oversupply slows demand.

 

2. Prices

2020 kicked off with Henry Hub spot prices at a three-year low. Overall in 2019, spot prices were among the lowest seen over the last three years, with Henry Hub averaging just $2.57/Dth in 2019 and projections centering around an average of $2.31/Dth in 2020. While analysts anticipate that markets may flirt with $2.00/Dth prices, they are quick to add such lows are not sustainable long-term and that the market will correct itself.

As another sign of a sluggish natural gas market, the rate at which oil trades compared to natural gas, recently reached 30-to-1. The five-year average is 19-to-1 whereas normal should be closer to 6-to-1. Fox business predicts the current oil-to-gas ratio imbalance may become more pronounced as average gas prices fall for a second consecutive year.

Either way, current prices may be a good buy in the event the second half of winter gets colder. Not sure what this means for you? Give us a call, we’re happy to help you evaluate your options.

 

3. A Look Back at 2019 

Production set new records in 2019, lifted by growth in the Permian, Appalachian, and Haynesville Basins and supported by added pipeline capacity. Even with low prices disincentivizing additional natural-gas directed drilling, especially in the latter half of 2019, substantial growth came from associated gas production which S&P notes accounts for nearly half of U.S. gas production. The lower prices led to increased consumption for power generation which likewise hit new records in 2019, most notably during the summer. Exports also broke records thanks to LNG. The EIA expects that the U.S. will be a net exporter of LNG through 2050.

 

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