Natural gas storage injections continue for the eighth week at or above 100 Bcf. This week’s 100 Bcf injection was above last year’s 75 Bcf injection and the five year injection average of 68 Bcf but failed to meet the forecasted predictions of 102 Bcf.
The demand for natural gas is in July expected to be lower than normal due to cooler temperatures. For more information on the weather, please see below.
Natural gas supply and production both increased overall. Supply increased at 0.1 Bcf/day for the third week in a row, landing at 73.4 Bcf/day. Total dry production also increased for the third week in a row by 0.1 Bcf/day.
Weather is a neutral market driver mainly because of the start of summer weather and uncertainty around the El Nino event. An El Nino event is correlated with cooler than normal temperatures and a suppressed hurricane season. WSI predicts below normal temperatures July through September for the north-central and northeastern United States. Warmer than normal temperatures are expected in the southeast, but if the El Nino occurs it has the potential to cool down that region of the US.
Please note the natural gas market closed at noon today in anticipation for the Independence Day holiday. Have a great weekend!Read More
The newly overturned EPA standards seek to cut carbon pollution created by power plants by an average of 30% by 2030. The new emission standards will accelerate the United State’s transition to using alternative sources of energy for electricity generation. Coal is considered the dirtiest fossil fuel and since 202, 297 coal-fired units at power plants have already retired or are scheduled for retirement.
Wyoming produces approximately 40% of the coal for our nation and, similarly, accounts for the most carbon per capita in the US. While the United States still relies on coal for nearly 40% of it’s electricity needs, Wyoming governor, Matt Mead, believes the emissions standards will hurt not only his state but also the rest of the nation. Because coal is so prevalent in Wyoming, it obviously provides quite a number of jobs to its citizens. They have vowed to keep coal as an ‘economic bedrock’ even if it means shipping overseas.
For more information please click here.Read More
North Dakota, where you can find the oil and natural gas-rich Bakken Shale, lacks adequate infrastructure. This means any natural gas that isn’t captured is flared off and in April alone, these wells burned off 10.3 Bcf of natural gas - equating to nearly $50 million dollars. Flaring off natural gas degrades air quality and energy companies lose out on revenue though many companies make the money back in the amount of crude oil they generate.
On Tuesday, a new set of restrictions were introduced. The North Dakota Industrial Commission, which regulates and promotes the state’s oil industry, is now requiring oil producers to abide by production allowances that limit flaring at new and existing wells. The guidelines go into effect on September 30 and set targets for flaring at 23% of all gas produced by January 2015. After, the target is reduced to flaring only 20% of natural gas produced by 2020.Read More
Weather Services International (WSI) expects no change to the quiet tropical season. This year may likely be the first since 2009 we go into July without one named storm. Regarding temperatures, WSI still expects below normal temperatures across the north-central and northeastern states. Above normal temperatures are expected in the Southeast US and western states. Click image below for the most recent forecast for July – September.
Natural gas storage increased by triple digits for the seventh consecutive week. The injection was 110 Bcf, above the expectations of approximately 104 Bcf. This injection was larger than the 81 Bcf 5-year injection average and larger than last year’s injection of 94 Bcf.
Chris Kostas, with Energy Security Analysis, Inc. (ESAI), predicts natural gas demand in July will be below average due to the cooler-than-normal temperatures expected over most of the country. This should result in relatively soft energy prices – particularly for the Northeast and Midwest markets.
Natural gas production is increasing in the three major tight oil production areas. The Eagle Ford, Permian Basin and Bakken Shale are partially responsible for natural gas production increasing by 5% overall so far in 2014. Since 2011, gas production in these three regions increased by 88%. Natural gas production hit a record high of 68.5 Bcf on Saturday.
Natural gas storage remains low compared to the one and five year averages but the 100+ Bcf builds are helping decrease the deficit. Overall natural gas demand surpassed production. Consumption rose 1.8%- driven by increases in the industrial and power burn sectors.Read More
The Federal Energy Regulatory Commission (FERC) approved the second natural gas export terminal in Louisiana.
Cameron LNG, LLC, owned by Sempra Energy, will build a liquefied natural gas (LNG) export facility in Hackberry, La. The project will cost nearly $10 billion and construction begins later this year. It is expected to export up to 1.7 billion cubic feet of natural gas per day by 2019.
About 24 projects still wait review from the Energy Department or FERC.
For more information on the matter, please visit the Bloomberg article here.Read More
The natural gas injection for this week came in at 113 Bcf, higher than the 110 that was expected. This is the sixth consecutive injection above 100 Bcf. As you saw from last week, injections have increased at a record pace and this week was no different. From the week ending on April 4 to the week ending on June 13, net storage injections have totaled 897 Bcf, versus 725 Bcf for the same 11 weeks in 2013, and 756 Bcf for these weeks between 2009 and 2013, on average (EIA).
With 20 more weeks in the injection season, there is still a lot of pressure to make up for the depletion we saw in natural gas storage this winter.
Weather is getting warmer which increases the demand for natural gas consumed for electric generation or power burn. Though power burn increased, the overall natural gas consumption has decreased for the seventh week in a row.
In the long term:
According to the June ITR report, there will be a slowing in the US economy late 2014 and early 2015. This is due mainly to slowing residential construction, decelerating retail sales and moderating growth in business to business activity.Read More
Each Thursday during injection season, the natural gas forecast pressures the market to meet or beat expectations. This past natural gas storage report was a perfect example of not meeting the lofty goal. Though expectations were at 110 Bcf, this week’s injection settled at 107 Bcf. While it is still a healthy number, not meeting or exceeding the projection sent the market to one of the highest single-day increases of the year.
After several weeks of healthy injections beating the one and five year averages, storage remains 727 Bcf less than last year’s record storage level. The five consecutive triple digit injections are largely due to natural gas production growth and flat-to-declining consumption across the commercial and residential sectors.
In The Long Term:
The EIA’s Short Term Energy Outlook (STEO), released June 11, has slightly revised predictions for overall natural gas consumption in 2014. Originally predicted at a 1.3% increase, the EIA now predicts consumption to increase 1.7% from 2013. This means total natural gas consumption will average 72.5 Bcf/day in 2014. In 2015 that number is expected to drop by 0.2 Bcf/day as the projected near-normal winter weather should lower residential and commercial consumption.
The STEO also revised the inventory number for the end-of-injection-season. Now, forecasters predict the inventory level will be 3,424 Bcf – an increase from 3,405 Bcf predicted in the last STEO edition. In order to arrive at the new level, it would require an average weekly injection of 87 Bcf through the end of October.
Natural gas production is still projected to increase each year due to advancements in drilling technologies and efficiencies. While this is positive news in terms of supply, it also supports both pipeline and liquefied natural gas (LNG) exports in the future.
U.S. exports of LNG are predicted to increase to 3.5 Tcf by 2029 and remain that that level for more than a decade. Please reference the chart on the back page of the executive summary to see the projected growth in LNG take off from around 2015 through 2040.Read More
Brent crude and light, sweet crude prices are currently at 9-month highs. Sunni militants continue advancing toward Baghdad – potentially threatening Iraq’s oil supply. Although most of the oil production is in the south of the country (far from where the current violence is occurring), market watchers worry that the situation will escalate. To read more please visit the Wall Street Journal article here.
Understanding the crisis in Iraq – at a glance:Read More
According to a Texas Tribune article published on June 11, 2014, Texas will have to slash carbon emissions from its power plants by as much as 195 billion pounds. Some suggestions for how Texas can comply with the climate change rules are listed below:
- Make existing coal plants more efficient – the cost around this could cause many coal plants to retire.
- Switch from coal to natural gas – natural gas plants are expensive to build. The switch to natural gas may not be as easy as it seems.
- Add more renewable energy sources – Texas generated nearly 32 million megawatt hours of electricity from wind ALONE in 2012.
- Increase energy efficiency measures to reduce electricity consumption overall – The EPA estimates Texas could cut 1.78% of its current energy demand through efficiency measures.
For more detail on the suggestions above, please visit the Texas Tribune article here.Read More
So far in June, we have seen normal to slightly above normal temperatures across most of the country. Aside from the slight revision for June, WSI forecasts a cooler than average summer and believes the emerging El Nino activity will reduce hurricane numbers.
The warmer temperatures are helping to continually decrease overall natural gas consumption in residential and commercial sectors. Consumption declined for the fifth week in a row, by 0.4 Bcf/day.
The natural gas injection was 119 Bcf, above expectations in the range from 114 to 118 Bcf. This was the fourth consecutive injection in the triple digits and the fifth largest injection in EIA records.
Despite a reduction in consumption, power burn continues grow – largely due to natural gas power plant demand increases in Texas and the Southwest. Production decreased slightly by 0.2 Bcf/day to 72.8 Bcf/day.
In order to reach the EIA’s projected storage number of 3,405 Bcf, we must average an 87 Bcf injection for the remaining 22 weeks in the injection season.Read More