Friday, May 15, 2020

EIA Natural Gas Weekly Update

From the Energy Information Administration:
for week ending May 13, 2020   |  Release date:  May 14, 2020
In the News:
Natural gas surpasses coal as primary generation fuel in MISO
Since March 20, 2020, EIA’s Hourly Electric Grid Monitor has shown that natural gas-fired generation has surpassed coal-fired generation as the primary source of electricity dispatched by the Midcontinent Independent System Operator (MISO), the regional transmission organization responsible for managing wholesale electricity generation and transmission across all or parts of 15 central U.S. states and the Canadian province of Manitoba. This is mainly a result of low natural gas prices; the start-up of three major high-efficiency, natural gas-fired combined-cycle power plants since mid-2019; and the increased share of wind-powered generation.

Since March 20, natural gas-fired generation provided approximately 32% of electricity within MISO, whereas coal-fired generation provided about 25% of the region’s electricity. In the three months preceding March 20, natural gas- and coal-fired generation were at parity, each providing approximately 31% of total generation in MISO. Before late December 2019, coal-fired generation almost always provided the greatest share of electricity within MISO.

Relatively low prices have driven the increased use of natural gas for power generation. Since March 20, the spot price of natural gas at the benchmark Henry Hub has averaged $1.70 per million British thermal units (MMBtu), according to Natural Gas Intelligence. However, much of MISO covers the Midwestern states (though not the Chicago area), so the price seen by generators in these states may be closer to the Midwest regional average price, which has been lower than the Henry Hub, averaging $1.60/MMBtu during this period. From December 20, 2019, through March 19, 2020, the Henry Hub price averaged $1.92/MMBtu, and the Midwest regional average averaged $1.79/MMBtu.
Since mid-2019, 2.3 gigawatts (GW) of new high-efficiency, natural gas-fired combined-cycle capacity has opened in MISO. These plants, including the brand new Lake Charles Power Station (a 1.0 GW natural gas combined-cycle plant in Louisiana) that opened on March 28, have very low heat rates, allowing them to be dispatched first and run at high levels.

The capacity of electricity generated by natural gas is expected to continue increasing in MISO, while coal-fired capacity is expected to fall. Through 2022, another 4.3 GW of net natural gas-fired generation capacity is planned to begin operation while 5.1 GW of net coal-fired generation capacity is scheduled to retire in MISO, according to the February 2020 EIA-860M data.

Additionally, wind-powered generation has also increased in MISO, evidenced by the addition of 3.2 GW of new wind turbine capacity since the beginning of 2019, including 660 MW of capacity added in 2020. Increased wind turbine capacity can affect natural gas-powered generation, since natural gas-fired power plants are often used in conjunction with wind power to serve as back-up power.

(For the week ending Wednesday, May 13, 2020)
  • Natural gas spot prices fell at most locations this report week (Wednesday, May 6 to Wednesday, May 13). The Henry Hub spot price fell from $1.88 per million British thermal units (MMBtu) last Wednesday to $1.56/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the price of the June 2020 contract decreased 33¢, from $1.944/MMBtu last Wednesday to $1.616/MMBtu yesterday. The price of the 12-month strip averaging June 2020 through May 2021 futures contracts declined 20¢/MMBtu to $2.362/MMBtu.
  • The net injections into storage totaled 103 Bcf for the week ending May 8, compared with the five-year (2015–19) average net injections of 85 Bcf and last year's net injections of 100 Bcf during the same week. Working natural gas stocks totaled 2,422 Bcf, which is 413 Bcf more than the five-year average and 799 Bcf more than last year at this time.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 40¢/MMBtu, averaging $3.75/MMBtu for the week ending May 13. The prices of ethane, propane, natural gasoline, and butane all rose, by 7%, 10%, 16%, and 18%, respectively. Rapid increase in demand for isobutane for alkylate production (a blendstock for premium gasoline) resulted in isobutane prices rising 29% week over week.
  • According to Baker Hughes, for the week ending Tuesday, May 5, the natural gas rig count decreased by 1 to 80. The number of oil-directed rigs fell by 33 to 292. The total rig count decreased by 34, and it now stands at 374.....
....U.S. LNG exports decrease week over week. Eleven liquefied natural gas (LNG) vessels (five from Sabine Pass, three from Freeport, and one from each Cameron, Corpus Christi, and Cove Point) with a combined LNG-carrying capacity of 40 Bcf departed the United States between May 7 and May 13, according to shipping data provided by Marine Traffic.

Three months of prices via FinViz:
1.7230 up 0.420 (+2.50%)

We are still looking for spot or a front month to print at $3.50 but it obviously wasn't the move from April into May, much as we would have liked it to be.