EIA Estimates Higher Energy Expenditures This Winter
The number of workers who filed for unemployment benefits is greater than the expected 825,000 at 898,000. Jobless claims are at the highest level since the end of August with the American public still awaiting a second stimulus package. In addition, U.S. stocks end lower for third session as jobless claims rise. Winter energy bills in the U.S. are likely going to be like last winter’s for residential natural gas and electricity prices. The EIA expects that households that mostly use electricity or natural gas will have slightly higher energy expenditures this winter and households that primarily use propane will spend about 14% more. Households that use heating oil are expected to spend 10% less compared to last winter. The average U.S. household is expected to consume more fuel for space heating this winter compared to last. Natural gas is the most common space heating fuel in 28 states, electricity is more commonly used in the south, heating oil is popular in the Northeast and propane is frequently used in the Midwest.
For the week ending October 9th, reported injection was 46 Bcf. Current gas storage inventory is 3,877 Bcf, up 388 Bcf or 11% from this time last year and up 353 Bcf or 10% from the five-year average. Meanwhile, the November 2020 natural gas contract is trading up $0.20 at $2.84 and the November 2020 crude oil contract is down $1.34 at $39.70.
Natural gas pricing plays a key role in electricity power pricing due to the increasing reliance on natural gas fired generators 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 parts 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 would not be able to keep up with demand due to LNG and Mexican exports.