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End-Of-Season NG Storage Estimates Lowest Since 2014

Front-month natural gas traded on the NYMEX closed yesterday at $2.866/MMBtu, up 0.24% from last week’s closing price of $2.859/MMBtu. At the Transcontinental Pipeline Zone 6 trading point for New York City, prices increased 18¢ from $2.92/MMBtu last Wednesday to $3.10/MMBtu this past Wednesday, with a high of $4.98/MMBtu on Monday (EIA). Natural Gas stockpiles decreased by 149 bcf while the market consensus was a withdrawal of 150 bcf. This same week last year saw a withdrawal of 60 bcf and the five-year average is 109 bcf. The total 1,390 bcf in storage is 14.9% below last year and 25.0% below the five-year average. The end-of-season storage estimates are currently at 1,050 bcf and only once in the last decade (2014) have storage levels been lower than where we are expecting to end up this year.

EIA’s Natural Gas Weekly Update stated “total U.S. consumption averaged 100.2 Bcf/d for the week, 32% higher than the same week last year. The residential and commercial sectors saw the largest increases as consumption rose by 16%. Natural gas consumed for power generation climbed by 9% week over week”. Exports to Mexico decreased 1% and the total daily demand exceed 100 bcf since February 24th (EIA).

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 is expected to continue to grow, however, there is speculation that demand growth wil l outpace supply primarily due to LNG and Mexican exports and increased power burn, presenting upside risk to power pricing in the future.

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