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NG Storage Decreases Due to Below Average Temperatures

Underground natural gas storage decreased by 78 Bcf compared to the week previous, due to continual below average temperature in the Midwest and Pacific regions. Prompt month gas prices remain steady to last week at $2.573/MMBtu. 12 and 24 Month strip prices decreased less than 1% while Calendar year strips increased by less than 1%. Warmer weather is predicted to sweep over most of the continental US over the next week which should lead to prices remaining flat to slightly lower. This week’s withdrawal is much less than the -183 Bcf withdrawal seen this time last year and the 160 Bcf five year average decrease in gas storage.

Power prices over the last week also remained steady in New York, New England and PJM. NYISO Zone J prices decreased the most over the last couple of days due to decreased demand on the grid, prices currently around $27.10/mWh from $ 28.70/mWh this time last week. Mass Hub is currently trading around $32/mWh, down about $0.80/mWh. Forward pricing for PJM’s Western Hub stayed within $.50/mWh of last week, closing around $25.35/mWh.

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 will 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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