(before the last heatwave but lower today than it was then, 2.118 vs 2.263)
Source: U.S. Energy Information Administration, Natural Gas Spot and Futures Prices and Short-Term Energy Outlook
In its July 2019 Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) forecasts Henry Hub natural gas spot prices for June, July, and August this year will average $2.37 per million British thermal units (MMBtu). If realized, this price would be the lowest summer average Henry Hub natural gas price since 1998. EIA expects Henry Hub natural gas prices will be 55 cents/MMBtu, about 19%, lower than last summer’s average.
In the July STEO, EIA revised its forecast for 2019 Henry Hub natural gas prices down from the June STEO following three consecutive months of price declines. Prices in June averaged $2.40/MMBtu and have declined by 19% since March.
Spot prices at key trading hubs across the country have traded close to the Henry Hub basis. Prices at the Transcontinental Pipeline Zone 6 trading point for New York City and the Chicago Citygate were both at $2.12/MMBtu, the lowest June average price and a decrease of 25% and 23%, respectively, from June 2018. The PG&E Citygate near San Francisco had the highest June average price at $2.59/MMBtu, a 14% decrease from last June.
Source: U.S. Energy Information Administration, Natural Gas Spot and Futures Prices and Short-Term Energy Outlook
The recent natural gas price declines reflect relatively mild weather for the start of summer that led to lower than expected natural gas-fired electricity generation, which allowed natural gas inventory injections to outpace the previous five-year average rate. Between April and June, cumulative net injections into underground storage fields have exceeded the five-year average by 41%, reducing the current five-year average deficit by more than 300 billion cubic feet (Bcf). In addition to the recent price declines, the lower price forecast reflects EIA’s updated assessment of U.S. drilling activity and average well productivity, both of which are higher than previously assumed...MOREAnd from OilPrice, July 28:
Natural Gas Glut Is Crushing US Drillers
The outlook for natural gas producers is not great. They are getting clobbered by low prices today, amid a glut. But the medium- and long-term looks even worse, with renewable energy increasingly taking market share.
The gas industry has drilled itself into this predicament. Gas production continues to ratchet higher, rapidly replenishing inventories, which had plunged to a 15-year low heading into this past winter season. Inventories are still below the five-year average, but have climbed quickly in recent months.
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If the natural gas industry had hoped that a stunning heat wave sweeping over a large swathe of the East Coast would rescue prices, they are surely now disappointed. Natural gas prices continue to fall, despite the heat, and there is little prospect of a rebound. On Friday, spot natural gas prices fell by another 3 percent, dipping below $2.20/MMBtu.
Record production from the Marcellus is one of the main reasons. But oil drillers are also to blame. The frenzied pace of drilling in the Permian – which, to be sure, has been slowing as of late – has produced a wave of natural gas so large that the industry is flaring enormous volumes of gas because of the lack of pipelines. Texas regulators seem unwilling to regulate the rate of flaring over fear of hurting the industry, so the flaring continues.
Still, record levels of associated gas production from the Permian are dragging down prices. New midstream capacity later this year from the Gulf Coast Express pipeline will bring more gas to market, adding to supply woes. More pipelines are in the offing for 2020 and 2021.
Even the increasing volumes of gas exported overseas is not enough to tighten up the market. “We expect the current oversupply to persist as production growth, mainly associated gas from oil basins, matches LNG export growth over the next year,” Bank of America Merrill Lynch wrote in a note....MORE
