Natural Gas Storage
Smaller Than Expected Injection Hurts Prices
Last week the Energy Information Administration reported a 2 Bcf build of natural gas stockpiles. While we did inject into storage, the market predicted an 8 Bcf injection. The lower than expected gain has contributed to the natural gas price spike. Storage levels are 15% above the 5-year average (17% below this week in 2016). Winter has ended and storage levels remain strong in relation to the 5-year average, yet weaker than 2016 levels.
If summer temperatures continue to be warmer than normal as predicted, expect gas and power prices to continue to rise.
Weather Forecast:Spring Storm Has Spiked Prices
Recent weather predictions of a strong spring storm, bringing snow and rain to the central and eastern states, have contributed to the natural gas price spike. The storm sparked concerns of a surge in natural gas demand for heating in the northeast quarter of the country. We hope prices and demand can ease back as temps return to normal (warm) conditions.
Both the 30-day and 90-day temperature forecasts are predicting above average temperatures across much of the continental US. April is expectedto have warm temperatures, especially in the southern states. The 90-day outlook also shows above average temperatures across most of the country, with an even higher confidence of above normal temperatures.
The near-term cold spell has spiked prices significantly; over the $3.30 plateau. It’s looking doubtful that the markets will settle back towards the $3.00 MMBtu threshold.
PricesHave Spiked Again
NYMEX prices are currently over $3.30/MMBtu and up 45¢ since late January (a 15% run-up). Weaker than expected storage injections, our recent cold snap and reduced production are all contributing to the price spike. All long-term strips are trading up with the 12-month strip trading around $3.48. Natural gas prices are at their highest since late January.
Typically, the spring brings increased production, falling demand and milder temperatures. Currently we are seeing decreased production, higher demand due to the recent cold snap and volatile temps.
In response to the natural gas run-up, power prices have also taken a similar trajectory; up 2¢/kWH in all FERC markets.
Natural GasPricesHave Spiked - Did You Miss Your Chance?
Market fundamentals are not aligning to keep prices low. Lower than expected storage injections, reduced production (lower drilling rig counts), and a cold snap hit us, just at the point where we should be seeing a drop in demand and milder temps.
The problem is that higher prices appear to have staying ability. Analysts expect prices to stay above the $3.25 threshold. With natural gas demands typically declining as the heating season ends, higher natural gas prices may not have much of an impact this summer. But, next winter gas prices may be significantly higher and more importantly this summer’s electric prices will be higher. Also, power capacity prices have significantly jumped for this summer season, pushing non-market driven price components even higher.In response to the US airstrike on Syria, oil prices moved up 2%; no telling the long-term impacts of this event or future Middle-East events.
It’s a difficult time to be stuck in a bad or expiring energy position. Call us for assistance.