Natural Gas Demand
Posted: Mon Jun 06, 2016 10:18 am
The U.S. natural gas market will be 3-5 Bcf per day tighter in Q3. If demand for power generation spikes as expected, we could see NYMEX gas for Q4 delivery over $3.00/mcf. The December contract is already there. - Dan
Initial taste of summer sparks a gas rally. Last, week NYMEX July natural gas prices
rallied above $2.40/MMbtu for the first time since January, ultimately finishing up ~11%
WoW. Continuing a trend we highlighted last week (see The Commodity Manual), US
balances are tightening ahead of schedule this injection season with the last three weekly
storage builds averaging nearly 1 Bcf/d tighter than summer targets while the storage surplus
has decreased by 330 Bcf since end-March. Looking ahead, fundamentals continue to look
supportive thanks to strengthening power burn while incoming heat for the Southeast and
newly commissioned pipelines to Mexico aim to ease worries of oversupply in EIA South
Central storage.
Power demand growth is reaccelerating. After cool temperatures and lackluster power
demand for most of May, growth has reaccelerated over the last two weeks. MTD power
demand is up ~2 Bcf/d YoY and at new 5-year highs for the month as Southeast, Midwest and
Northeast power demand has reaccelerated. In the Southeast, power demand has so far
increased 2.2 Bcf/d from May levels and 1.2 Bcf/d from year ago levels. Midwest demand has
remained strong all spring with MTD power demand up ~40% from June 2015 levels. Last,
after cool temperatures led May Northeast power demand to fall ~700 MMcf/d YoY, warm
temps have pushed MTD burn higher by 2.1 Bcf/d MoM and 720 MMcf/d YoY.
South Central Storage May continued to tighten, easing worries of oversupply. Not only
is strong power demand across the US helping, regional storage fears (particularly in the
South Central states) may also be easing. We think two noteworthy developments in the past
week, in addition to the first storage draw from South Central salt caverns last week, are
helping with issues we raised last week (see The Commodity Manual).
Southeast should see sustained heat through most of June. Weather outlooks have
turned much hotter than normal (and mostly drier) for the South Central/South Eastern US
through much of June which should support continued power burn strength in the
Southeast and possibly Texas once rain/flood conditions subside.
The Los Ramones pipeline finally commenced operations. Bloomberg and pipeline
flow data confirmed the pipeline went into service on 5/31, initially flowing 310 MMcf/d.
Initial taste of summer sparks a gas rally. Last, week NYMEX July natural gas prices
rallied above $2.40/MMbtu for the first time since January, ultimately finishing up ~11%
WoW. Continuing a trend we highlighted last week (see The Commodity Manual), US
balances are tightening ahead of schedule this injection season with the last three weekly
storage builds averaging nearly 1 Bcf/d tighter than summer targets while the storage surplus
has decreased by 330 Bcf since end-March. Looking ahead, fundamentals continue to look
supportive thanks to strengthening power burn while incoming heat for the Southeast and
newly commissioned pipelines to Mexico aim to ease worries of oversupply in EIA South
Central storage.
Power demand growth is reaccelerating. After cool temperatures and lackluster power
demand for most of May, growth has reaccelerated over the last two weeks. MTD power
demand is up ~2 Bcf/d YoY and at new 5-year highs for the month as Southeast, Midwest and
Northeast power demand has reaccelerated. In the Southeast, power demand has so far
increased 2.2 Bcf/d from May levels and 1.2 Bcf/d from year ago levels. Midwest demand has
remained strong all spring with MTD power demand up ~40% from June 2015 levels. Last,
after cool temperatures led May Northeast power demand to fall ~700 MMcf/d YoY, warm
temps have pushed MTD burn higher by 2.1 Bcf/d MoM and 720 MMcf/d YoY.
South Central Storage May continued to tighten, easing worries of oversupply. Not only
is strong power demand across the US helping, regional storage fears (particularly in the
South Central states) may also be easing. We think two noteworthy developments in the past
week, in addition to the first storage draw from South Central salt caverns last week, are
helping with issues we raised last week (see The Commodity Manual).
Southeast should see sustained heat through most of June. Weather outlooks have
turned much hotter than normal (and mostly drier) for the South Central/South Eastern US
through much of June which should support continued power burn strength in the
Southeast and possibly Texas once rain/flood conditions subside.
The Los Ramones pipeline finally commenced operations. Bloomberg and pipeline
flow data confirmed the pipeline went into service on 5/31, initially flowing 310 MMcf/d.