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Heatwave Expected to Bring Highest Cooling Demand Ever Recorded in September

Front-month natural gas contract closed yesterday at $2.538/MMBtu. For the week ending 9/13, storage saw an 84 bcf injection, which was 8 bcf higher than the 76 bcf addition expected by market analysts. The current storage capacity is 71% full with 3,103 bcf. This is 14.5% above last year’s 2,710 bcf for the same week, and 2.4% below the five-year average of 3,178 bcf. At the Transco Zone 6 pipeline, which services NYC, natural gas prices fell 29 cents from $2.30/MMBtu last Wednesday to $2.01/MMBtu this past Wednesday (EIA). “Widespread heat across the nation including a stronger heatwave for the Midwest and East next week will bring the cooling demand up to the highest level ever recorded in September” (Constellation).

Ohio Governor Mike DeWine signed into law House Bill 6 which is supposed to go into effect on 10/22/2019. This will reduce RPS requirements through 2026 and eliminate them by 2027. This bill will also eliminate the solar carve-out by 2020. However, this new law is being challenged by the Ohioans Against Corporate Bailouts (OACB), which has launched a referendum effort to overturn the legislation. “If the petition is found to be valid by the Secretary of State, the legislation will not go into effect until it has been approved by the voters in the 2020 General Election” (Constellation).

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.

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