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Blockage in Panama Canal Could Extend LNG Price Uncertainty

Even with the warm weather forecasts and strong production, the natural gas market gained slightly during yesterday’s trading session. The entirety of the U.S. warmed 2 degrees Fahrenheit. This is an
average of 3 degrees warmer than normal.

LNG pipeline returns averaged 11.1 Bcf/day for March 11-17th according to the EIA, which may have contributed to the larger-than-expected withdrawal. Congested shipping channels near the Panama Canal are causing deliveries to be delayed, which could potentially extend price uncertainty. Storage came in at 1,746 Bcf, which is -13% below this time last year and -4.3% below the five-year average. The April 2021 natural gas contract is currently trading at $2.57/MMBtu while the
May 2021 crude oil contract is at $59.25.

Natural gas pricing plays a key role in electricity power pricing due to the increasing reliance on natural gas fired generat ors as nuclear, coal, and oil generation is retired and mothballed. As the marginal unit
of generation, gas prices are directly correlated to power pricing (more so in some regions such as NYC vs. others such as pa rts of PJM). We keep an eye on natural gas market fundamentals in order to provide insights into forward power pricing for our clients. Gas production has grown and surpassed any speculation that production w ould not be able to keep up with demand due to LNG and Mexican exports.

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