Natural Gas Storage
Normal Storage Withdrawal Drives Price Down
This past week, EIA reported natural gas withdrawal of 48 Bcf from storage, which was slightly more than predicted. Current storage levels are 36% above the 5-year average and 46% above last year’s level. The bullish storage report had no effect on gas prices, as they continued to drop.
As we move towards the end of winterand into spring, weather becomes less of a price driver. Gas storage and production becomes the primary drivers in natural gas prices. With high storage levels, even a sudden temperature plunge should have little impact on prices. That’s great news if you’re looking to lock into long-term energy rates.
Weather Forecast: Above Average Temperatures Across the Northern Two-Thirds of the Country
The National Oceanic and Atmospheric Administration continues to predict above average temperatures for the northern two-thirds of the country and all western states through May 2016. Some below normal temperatures are expected in parts of Texas and New Mexico.
Continued above average temperatures should bode well for prices through the remainder of winter and into spring. We will begin to look towards the impact that low gas prices will have on gas-fired power generators. Start to think about locking in summer electric rates.
Natural Gas Prices Continue their Trek Lower
Last week, spot prices traded lower to $1.62/MMBtu; nearing historic lows not seen since the 1990’s. With warmer temperatures expected in the next few weeks, production near all-time highs and storage at 5-year highs, prices look to remain low and possibly drop further. We are starting to see prices remain under the $2.00 threshold and it would be difficult to expect prices to rally given that the end of winter is nearing and that we have a substantial amount of gas in storage.For the year, prices are down 28%.
Shale production remains strong and appears to be outpacing the weak heating demands from this winter. April gas contracts traded lower at $1.65 last week, while crude oil contracts dipped to $34.50.
Declining gas prices drove electric prices to a record seasonal low last week. PJM on-peak spot prices (western hub) averaged $27.60/MWH and New York City saw prices reach all-time lows for this time of year averaging $21.34.
Natural Gas Pricesare Low and They're Pulling Power Prices Down Too
The winter is basically over and turned out to be a mild one. With record storage levels and near record low gas prices, we are beginning to see power prices drop. It’s a great time to review all of your energy prices and lock in long-term pricing across the board.
Our concern should be focused on the financial health of many producers. With prices low and storage high, production may begin to slow. If the balance between supply and demand sees a significant supply shift, we could begin to experience prices moving back up.