Below is the energy market update for early August. With temperatures beginning to stabilize from the summer season, the market has started to stabilize, causing the demand to continue to grow.
Reasons to Buy:
- Weather normalized demand continues to grow. Injections have been shallow even with the milder weather.
- It’s looking unlikely that we’ll set another record this year. Average weekly injection for next 15 weeks would need to be ~66BCF.
- Several new LNG facilities coming online in the next year. At least 90,000MW of new natural gas generation currently being developed (150+ new plants to be online by 2020.)
- Market will turn bullish quickly depending on how hot it gets (cooling demand.)
Reasons to Wait:
- Colder than average weather has kept prompt month gas under $3.
- Next two weeks are expected to be cool across most of the US.
- With natural gas production growth projected and significantly higher rig counts versus last year, the market could fall if incremental demand doesn’t keep up.
- 189 gas rigs (-3 this week) vs. 81 gas rigs last year.
Gas Market Highlights:
- Last week was the 17thstorage report and 17th injection of the 2017 Injection Season. Injection (20 BCF) was within analysts’ expectations (15-25). Storage is now 279 BCF below last year’s level and 87BCF above the 5 year average.
- Year over year deficit has decreased 7.6% since the previous week.
- Surplus over 5 year average has decreased 21.6% since the previous week.
- September 2017 NYMEX trading at 2.801 after opening at $2.772.
- Next 7 days:
- 0.5-6 below normal for most of the US.
- Week following:
- 0-2 below normal for most of the US.
Note: Although natural gas does not necessarily indicate where electricity pricing is at, it is good as a general barometer for electricity markets as a whole. When gas gets expensive, so does electricity generated from natural gas.