Gas Fired Generation

Last year at this time (May 2014) the natural gas market was concerned with how depleted US natural gas storage might be by the start of the 2014-15 gas winter season. A short year later, the concern now is how full storage could get before next winter. CME/NYMEX Henry Hub natural gas futures prices for June delivery closed at 2.915/MMBtu yesterday – presumably reflecting a decidedly bearish 2015 supply/demand balance with forecasts predicting summer-ending inventory at upwards of 4.1 Tcf, which would be the highest on record. Today we provide an update on gas fundamentals.

This year’s natural gas power burn is shaping up as a record-breaker, mostly because gas consumption needs to rise sharply to offset increased production and the power sector is best able to ramp up its gas use. But what will it take, gas-price-wise, for utilities and independent power producers to increase their 2015 power burn by 2, 3 or even 4 Bcf/d this year? And which parts of the U.S. are likely to see the most dramatic coal-to-gas switching? Today we continue our look at this year’s power burn and its significance to Marcellus and other gas producers.