Lower-48 natural gas demand surged in 2018, managing to offset ballooning production volumes and putting the gas market on the razor’s edge going into this winter. Demand growth occurred across all domestic sectors as well as export markets, but was led by increased demand from power generators. Some of that was weather-related. However, there also was a level-shift up in demand on a per-degree basis, meaning more gas was burned than historically at the same temperatures, signaling a gain in gas market share. What were the drivers, and can we expect this growth pace to continue? Today, we take a closer look at the demand components behind the recent growth trends.
As we discussed recently in our Razor’s Edge Part 1 blog, the Lower-48 gas supply-demand balance in 2018 was especially tight. The combination of the tighter balance and an enormous deficit in storage compared with 2017 and the five-year average had the market unsettled going into the coldest months of this winter. At the time, we looked at the annual average balance for the January-November period in 2018 versus the prior years going back to 2010.
NATGAS Permian is a weekly natural gas fundamentals analysis focusing entirely on the key market drivers within the Permian basin. The report contains details and forecasts around natural gas production, demand, pricing, and a summary of pipeline outflows and capacities from the Permian to neighboring regions.
Figure 1 shows the same graph again, this time using the full-year average balance for each year (navy blue bars, left axis), which takes total supply minus total demand (including imports/exports but excluding storage), based on data from RBN’s daily NATGAS Billboard report. A positive balance reflects the surplus supply that is available for storage. A larger surplus on average leads to higher injections during the summer and/or lower withdrawals during the winter (a more bearish price scenario), while a smaller surplus or negative balance has the opposite effect, dampening injections and requiring stronger withdrawals to help balance the market (more bullish). The graph also overlays the November-ending storage inventory estimate for each year (orange line, right axis), as reported by the Energy Information Administration (EIA), which reflects how much gas was available for withdrawal going into the highest-demand winter months.
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About the song
"The Razors Edge" is the fourth track on AC/DC's 11th internationally released studio album of the same title. It was written by band members and brothers Angus and Malcolm Young. Released in September 1990, the album reached #2 on the U.S. Billboard 200 chart and has been certified 5x Platinum by the R.I.A.A. The song, "The Razors Edge," also appears on the 2010 Iron Man 2 album. It is the 12th track on a soundtrack that serves as a retrospective of AC/DC's catalog to that point in time.
AC/DC is an Australian rock and roll band that was founded in Sydney in 1973 by brothers Malcolm and Angus Young. The band defines themselves as "a rock & roll band, nothing more, and nothing less." They have released 16 studio albums and one live album. AC/DC has won one Grammy Award in 2008 for Best Hard Rock Performance — for "War Machine" from the Black Ice album. After the death of Malcolm Young, and the departures of lead singer Brian Johnson and bassist Cliff Williams, the future of the band is undecided.
Comments
While End of Nov is a good measure, I would in the future take the Storage Balance before the week of first cumulative draw. That is take the highest balance of each year bfore net withdrawals appear. Of late injections have quite often continued into as late as the 2nd week of Dec.
Likewise take ending inventory as the last inventory before net injections persist.
Thank you, glander, good points and something I'll consider for next time.