Natural Gas in Underground Storage

The weekly EIA Natural Gas Storage Report advised that there was a withdrawal of 173Bcf from Underground Storage for the week ending January 25th, 2019.

This is 22Bcf below the median forecast of a 195Bcf withdrawal, the average prediction of sector analysts and traders in the Dow Jones Newswires weekly survey. The withdrawal compares with -99Bcf last year and -160Bcf for the five-year average. Storage is 14Bcf below last year for the same week and 328Bcf below the 5-year average. Working gas in storage stands at 2,197Bcf. The February Natural Gas Contract closed at $2.962. Read more.

Natural Gas Pricing


As of 9:41AM CST, March 2018, (the new prompt month) Natural Gas was trading at $2.83, -$0.25 from one week ago and the 1-Year Spread average was $2.93, -$0.02 from one week ago.

Crude Oil Pricing


As of 9:11AM CST, March, 2018, (the new prompt month) Light, Sweet Crude on the NYMEX was at $55.17, +$2.35 from one week ago.

Crude Oil Inventory


US crude inventories increased by 0.9 million barrels to 445.9 million barrels for the week ended January 25th, according to data released yesterday morning by the US Department of Energy. Traders in the Reuters poll projected a decrease of 3.1 million barrels.

U.S. Rotary Rigs


U.S. Rotary Rigs drilling for natural gas were -1 at 197 for the week of January 25th. The number of rigs currently drilling for Natural Gas was +9 from last year. US Rigs drilling for oil were +10 at 862. There are 103 more rigs targeting oil than last year. Canadian rigs were +23 at 232 for the week. Rigs targeting oil remain at 81% of all US drilling activity.

Geopolitical


The U.S. Is Set To Become A Major Net Energy Exporter: This month the Energy Information Administration released its Annual Energy Outlook (AEO) 2019 with projections to 2050.  The purpose of the AEO is to provide long-range energy projections for the United States, based on a Reference case and six side cases that vary important underlying assumptions.

The Reference case projection is the benchmark case. It assumes that known technologies continue to improve along recent trend lines. The economic and demographic trends that are used reflect the current views of leading forecasters.

Two of the most most important side cases are the High and Low Oil Price cases, which represent conditions that could collectively drive prices to extremes. The key takeaways from the AEO2019 are:

The U.S. becomes a net energy exporter in 2020 and remains so through 2050 as a result of large increases in crude oil, natural gas, and natural gas plant liquids (NGPL) production and slower growth in U.S. energy consumption. Read more.

Weather

The AccuWeather 1-5 day Outlook forecasts above-normal temps for the majority of the country except for the far north and the Northeast, which are expected to be at normal temps - with New England below normal. The 6-10 Day Outlook forecasts the Eastern 1/3 of the US at above-normal temps with the West at below-normal and normal temps for the center of the nation.

11-15 Day Outlook  forecasts below-normal temps for the New England and part of the North Central states with the deep Southeast at above-normal temps and the balance of the country at normal temps. The 30-day Outlook projects below-normal temps for the Eastern half of the US,  above-normal temps for the Northwest and normal temps for the balance of the country.

The 90-Day Outlook projects normal temps for the entire country, with the exception of the far Northwest, which is expected to be at above-normal temps. While above-normal temps are projected in the 1-5 day forecast, most of the country has been seeing extreme cold. Much of the North has been at below-zero temps, using more natural gas for heating.

Sustainability and Renewables


How Can Glass Help Us Mitigate Climate Change? The Arctic is in trouble. The National Oceanic and Atmospheric Administration’s (NOAA) Arctic Report Card, released in December 2018, shows we’ve lost 95 percent of the oldest and thickest ice in the Arctic over the past three decades. This report card also revealed that 2018 showed the second-warmest air temperatures, second-lowest overall sea-ice coverage in the Arctic, and the lowest ever recorded winter ice in the Bering Sea in recorded history. Why is this so alarming?

Historically, the Arctic has acted as the Earth’s global heat shield. Much like a white T-shirt on a hot summer’s day, the ice has helped keep the Arctic cool in the hot summer sun. By reflecting incoming 24-hours-per-day solar energy away from the Arctic, Arctic ice has helped keep the Earth cooler and its weather more stable than what we see today — and what we’ll be seeing more in the future.

This loss of ice and snow in the Arctic now accounts for more than one-quarter of global temperature rise. It also plays a major role in the U.S. drought and wildfires in California and worsening Nor’easter winter storms. Worldwide, loss of Arctic ice contributes to increasingly severe tropical storms, harsher winters in northern Europe, and rising seas. Restoring ice in the Arctic would slow down global warming and reduce species extinctions. This would buy society time to undertake, in parallel, the also-urgent work to switch economies to sustainable energy sources and reduce CO2 levels. Read more.

This Week's Key Take-Away


And... Another Polar Vortex. Extreme cold enveloped the majority of the country, causing electric, natural gas and heating oil use to spike. While not reflected in this week's withdrawal from underground storage, next week's Natural Gas withdrawal should exceed 200Bcf. Oddly, the next 10 days project warmer-than-normal temps for much of the US.

The spot prices for electricity in the Northern states have been very high, with the NYISO leading the pack with prices exceeding 11.4 cents /kWh. Texas' ERCOT North is currently trading at 2.2 cents /kWh, having escaped the brutal cold seen in much of the country.

As winter is just half over, forecasts show more extreme cold coming and therefore a possible shortage of Natural Gas, which should push prices back up above $3. 

Capacity is an issue in some states like Texas, where a number of Natural Gas and Coal-fired electric generators have been retired or have announced permanent shutdowns. Pennsylvania has announced the retirement of the Three Mile Island Nuclear Plant this year, the site of a partial meltdown of Reactor #2 40 years ago. Massachusetts is slated to retire the Pilgrim Nuclear Reactor this year as well. How fast these states can replace the output of the Nuclear plants and/or shutdown of fossil fuel plants will determine their ability to generate enough electricity to meet demand. Texas is in a particularly precarious position, as a number of wind and natural gas generation has been cancelled due to return on investment.