supply/demand

Northeast production growth, the primary driver of overall gains in U.S. natural gas output in recent years, has largely stalled in 2016. Rig counts in the Marcellus/Utica dropped to near six-year lows, and the region has been facing constraints—from takeaway capacity and in the past month or two from storage injection capacity. But market factors are again about to roil the Northeast: 1) winter heating demand is on its way, and 2) more takeaway capacity has come online in the past month and still more is coming before the year is up. Today, we review recent Northeast natural gas production trends using pipeline flow data from Genscape and assess factors that will impact regional production this winter.

Northeast natural gas production has been averaging nearly 3.0 Bcf/d higher this year than last year, while demand has lagged behind due to mild weather. At the same time, storage inventories are running well above normal and there is little new takeaway capacity due online this summer. This means the Northeast is under pressure to balance excess supply in the region. In today’s blog, we wrap up our analysis of the Northeast supply/demand balance with a closer look at recent demand trends.

The Northeast has been the biggest driver of U.S. natural gas production growth in recent years, and while rig counts have come down, output from the Marcellus and Utica has remained resilient and helped offset declines in other supply regions. In the process, the Northeast has reinvented itself, shifting from a gas-thirsty consuming region to one of the biggest gas net producing regions in the U.S. But pipeline flow data indicates that Northeast production peaked in February and growth has flattened since then. Is the data signaling a long-term peak or is this a temporary lull? Today, we continue our analysis of the Northeast supply/demand balance with a closer look at recent production trends.

The U.S. Northeast natural gas supply/demand balance has been getting less and less short in recent years due to the onslaught of Marcellus/Utica production, and in 2015 flipped to net long supply for the first time on an annualized basis. That means the 15-state Northeast region as a whole produced more gas in 2015 than it used. Then, in the winter of 2015-16, the region reached another milestone when it ended the season net long supply for the first time. Now regional production may be flattening out and future growth is at risk as takeaway capacity projects face economic and regulatory headwinds. What does that mean for the Northeast balance going forward? Today, we begin a series analyzing the latest fundamental trends in the Northeast gas market.

On Friday (March 4, 2016) the April NYMEX/CME futures contract settled at $1.666/MMBtu, the lowest contract settlement since 1999. Rock bottom prices reflect a growing supply/demand imbalance and concerns about hitting storage capacity limits later this year. Last Thursday’s EIA report showed U.S. gas inventory stands 827 Bcf above last year at this time and 687 Bcf above the 5-year average. These are the biggest surpluses the market has seen since 2012. Moreover, our latest NATGAS Billboard storage outlook shows March withdrawals lagging way behind last year and expanding the surplus further heading into April. In today’s blog, we look at how a similar situation was resolved in 2012 and what it will take to bring down the surplus this year.

Crude prices have fallen 21% since the start of 2016 and may fall further with the end to Iranian sanctions threatening to release yet more supplies into a saturated market. The U.S. benchmark West Texas Intermediate (WTI) closed at $29.42/Bbl Friday (January 15, 2016) and is now down 78% since the price rout began in June 2014. What has changed in the past two months to make crude prices fall so fast this year? Today we begin a two-part discussion of the fundamental factors underlying current weakness in the crude market. 

The U.S. natural gas market is facing an ultimatum. Natural gas storage inventories are carrying such a daunting surplus, that prices already at 21-year lows for December, seem primed to go even lower should supply or demand fail to cooperate and balance the market. A warm winter so far and the very real prospect of hitting a storage celling before next winter mean that something has to give.  Today we wrap up our series on the gas supply/demand balance with a look forward to how 2016 could pan out.

Overall oil prices and the differentials between the world’s different benchmark crude grades have been on a rollercoaster ride over the past decade. In the last eighteen months - since June 2014 – rising production of U.S. shale crude together with oil producer cartel OPEC’s decision not to curb output in response - have led to significant worldwide supply and inventory surpluses that are hurting producers and providing a windfall to many refiners. Today we review a new report from Turner Mason & Company that offers a detailed analysis of global crude oil supply and demand drivers and pricing over the next 10 years.

The U.S. propane industry is evolving rapidly in response to increasing production and the resulting development of new market demand sectors in exports and PDH plants to make “on-purpose” propylene. Two years ago in the winter of 2013-2014 all the new production growth could not prevent a perfect storm of weather events from causing severe shortages and price distress for domestic customers in the Mid-Continent and East Coast regions. Today we describe how the propane market is now much better equipped to endure a similar spell of extreme demand.

Producers in the Marcellus and Utica shale plays could be moving a lot more natural gas into New England, if only there was enough pipeline capacity to get it there. An increasingly gas-hungry neighbor to the nation’s most prolific production area, New England has added precious little capacity to transport gas, and the fates of game-changing pipeline projects that have been proposed hang in the balance. The region’s unique gas-delivery challenges, their market impacts and possible solutions are the subject of RBN Energy’s newly released Drill Down report, “Please Come To Boston—New England’s Ongoing Gas-Supply Dilemma”. Today, we provide a preview, and highlight some of the report’s findings.