July 13, 2018 – Natural Gas Intelligence
Production Squashing Storage Fears as Natural Gas Futures Continue Slide
By: Jeremiah Shelor
Natural gas futures bulls gave up more ground Friday as production continued to allay the market’s storage concerns. Spot prices fell throughout the Midwest with cooler temperatures in the forecast, while the volatile SoCal Citygate gained heading into the weekend; the NGI National Spot Gas Average dropped 3 cents to $2.68/MMBtu...
Read the full article here: http://www.naturalgasintel.com/articles/115060-production-squashing-storage-fears-as-natural-gas-futures-continue-slide
...Genscape Inc. analysts Vanessa Witte and Nicole McMurrer on Friday said the region lost about 120 MMcf/d of production because of an explosion last month that forced part of the Leach XPress line to be shut in.
Immediately after the explosion, “impacts were uncertain, but due to the recent in-service of the pipeline path, almost all production was able to be routed onto other pipelines,” Witte and McMurrer said. Further output from Leach XPress would add to what has been a “meteoric rise” in Lower 48 dry gas production this year.
At least, that’s how RBN Energy LLC analyst Sheetal Nasta described the 3 Bcf/d surge since April that has seen production reach nearly 82 Bcf/d month-to-date. That’s roughly 9 Bcf/d (12%) higher year/year (y/y), Nasta said.
Still, “record demand volumes thus far have managed to keep storage injections in check,” Nasta said, describing a situation where “the record production level is clearly dampening the gas futures price action but appears to be having little effect on shrinking the deficit, at least so far.”
There are a couple factors at play, according to Nasta. For one, a solid chunk of production gains showed up over the last couple weeks “and then they happened all at once, just as seasonal air conditioning demand was also picking up.
“That leads us to the other major factor -- that demand has been exceptionally strong as well...In terms of U.S. consumption,” including power generation, residential/commercial and industrial, “daily volumes have averaged nearly 70 Bcf/d this injection season to date, which is about 7 Bcf/d higher than the same period last year and the highest on record for this time of year,” Nasta said.
“The incremental demand has been in part due to weather, but also due to structural changes to the power generation fleet, including new gas plant additions and the retirement of a substantial volume of coal plant capacity.”
