As we roll into winter and seasonal cold fronts return, sharp drops in water levels across Galveston Bay and the Houston Ship Channel could potentially tighten drafts and disrupt crude loadings.
The Energy Information Administration (EIA) recently changed the weather forecast methodology for one of its most important energy models — the Short-Term Energy Outlook (STEO) — and while we talk about the effects of weather on energy markets fairly often (571 times in the past 12 years, or about once a week, but who’s counting?), we rarely take a step back and explain how those weather forecasts are used. In today’s RBN blog, we look at different approaches to weather forecasting, the recent change made by the EIA, and how the new approach might affect our understanding of EIA forecasts.
Everyone in Texas remembers the infamous Winter Storm Uri of three years ago. What started out as a simple cold snap for many quickly turned into something far more serious: the biggest power outage in state history, with billions of dollars in property damage and hundreds of lives lost. Since then, the expected arrival of frigid temperatures has been met with some trepidation, but the critical failures of February 2021 have so far been avoided in subsequent storms. In today’s RBN blog, we look at the steps the state has taken in recent years to weatherize its power grid, show why January’s cold snap turned out to be no big deal, and explain why renewables are playing an increasingly important role in grid reliability during extreme weather conditions.
Total U.S. LNG export capacity is around 12 Bcf/d, including the still-commissioning-but-nearly-complete Calcasieu Pass. About 13.5 Bcf/d of U.S. natural gas supplies, or feedgas, is required to produce that much LNG, but feedgas demand has averaged just 10.5 Bcf/d over the past week despite still-soaring global gas prices and an undersupplied global LNG market. Two U.S. terminals are currently offline: Freeport LNG, which has been out of service since an explosion and fire in June, and now Cove Point LNG, which shut for annual maintenance October 1. Beyond those outages, which have taken about 2.75 Bcf/d of demand out of commission, LNG feedgas volumes have been extremely volatile, swinging as much as 2 Bcf/d within a week. Don’t expect this to last, however — with winter approaching, the return of both Freeport and Cove Point on the horizon, and the full startup of Calcasieu Pass in sight, feedgas demand will likely rise to new heights and soon consistently top 13 Bcf/d. In today’s RBN blog we take a closer look at the recent volatility in LNG feedgas and the potential demand coming this winter.
Canadian gas storage levels concluded the most recent heating season at multi-year lows, especially in the western half of the nation, which hit a 16-year low at the end of March. Though storage sites have been refilling at a steady rate so far this summer, storage in the west, a region vitally important for balancing the North American gas market during high winter demand, remains unusually low for this time of year. In today’s RBN blog, we examine the latest developments in Canadian natural gas storage and explain why storage levels in Western Canada may start the next heating season at critically low levels.
Extreme blizzard conditions wreaked havoc on North Dakota energy infrastructure last weekend, taking offline as much as 60% of the state’s crude oil production and more than 80% of natural gas output, and leaving utility poles and power lines strewn across the landscape. On the gas side, the unprecedented supply loss is having a never-before-seen impact on regional and upstream flows and storage activity. It is also compounding maintenance-related production declines in other basins, leaving Lower 48 natural gas output at its lowest since early February. Moreover, the extent of the storm-related damage to local infrastructure could prolong the supply recovery. In today’s RBN blog, we break down the aftereffects of the offseason winter storm on regional gas market fundamentals.
Prompt CME/NYMEX Henry Hub natural gas futures prices averaged $4.54/MMBtu this winter, up 67% from $2.73/MMBtu in the winter of 2020-21 and the highest since the winter of 2009-10. Prices have barreled even higher in recent days, despite the onset of the lower-demand shoulder season, with the May contract hitting $6.643/MMBtu on Monday, the highest since November 2008 and up more than $1 from where the April futures contract expired a couple of weeks ago. Europe’s push to reduce reliance on Russian natural gas has turned the spotlight on U.S. LNG exports and their role in driving up domestic natural gas prices. However, a closer look at the Lower 48 supply-demand balance this winter vs. last suggests that near-record domestic demand, along with tepid production growth, also played a significant role in drawing down the storage inventory and tightening the balance. Today’s RBN blog breaks down the gas supply-demand factors that shaped the withdrawal season and contributed to the current price environment.
Global natural gas prices are once again at record levels as escalating tensions between Russia and the Western world have re-ignited fears over gas shortages in Europe this winter. The global gas market is in the midst of an epic bull run that has been going on for more than a year, taking prices from all-time lows in the summer of 2020 to repeated all-time highs. And while strong demand for gas and LNG has underpinned prices and tied global gas markets together, Europe has been the driving force behind most of the headlines and panic-driven price run-ups. Prices in Europe have climbed to nearly $60/MMBtu as market fears around Russian gas supplies into Europe have been renewed by threats of new U.S. sanctions on Russia over aggression toward Ukraine, delays to the startup of the controversial Nord Stream 2 pipeline, continued low gas flows from Russia to Europe on existing infrastructure, and now Europe is facing its first real cold snap of the season. In today’s RBN blog, we take a look at the situation in Europe and its impact on the global gas and LNG markets.
For six months, European natural gas prices skyrocketed higher almost every day. The soaring prices made sense. Gas inventories in Europe were low following higher-than-normal demand last winter. Economies were recovering from COVID-19. Russia was curtailing gas deliveries. It all added up to a likely supply shortage during the winter of 2021-22. And the market did what markets do: anticipate. Even though the next winter season was months away, gas buyers went to work, stocking up on supplies like squirrels gathering nuts. The more prices increased, the more panic buying kicked in. By last Tuesday, October 5, the European TTF price was up more than 5X what it had been on May 1. Then, on Wednesday, a few comments from Vladimir Putin seemed to pop the bubble, and within a few days the Dutch TTF price was down 27%. Is everything OK now? Was the gas-price run-up all just speculative buying and short covering? Or is a supply crunch still on the horizon, and this is just the calm before the storm? In today’s RBN blog, we explore those questions.
Last week, panic over gas availability and energy reliability this winter sent international natural gas and LNG prices above $30/MMBtu for the first time. Asia’s Japan Korea Marker (JKM), Europe’s Dutch Title Transfer Facility (TTF) and the UK National Balancing Point (NBP) once again had multiple days in a row of all-time high settlements, as the undersupplied market struggles to find balance. The global shortage has also impacted the gas-rich U.S. market, which is linked to it through LNG exports. The U.S. markets are tight and might also face undersupply this winter, albeit, probably not to the point of triggering reliability issues that are already emerging abroad. If it did, the U.S. exports nearly 10 Bcf/d of LNG, which could be throttled back to free up additional supplies for domestic use. Nonetheless, Henry Hub prices climbed to nearly $6/MMBtu last week and hit post-2008 record highs. This is by no means the first-time various markets have faced considerable imbalance. In fact, last year at this time we were coming out of a period of widespread oversupply and record-low gas prices. But it’s certainly foreboding that it’s not even winter yet, and prices are skyrocketing to new heights. So the big question on everyone’s mind is how bad could this get? The answer of course is complicated and heavily dependent on weather. In today’s RBN blog, “To the Moon and Back – U.S., International Gas Markets Strap in for Wild Winter Ride,” Lindsay Schneider takes a look at how we got here, how LNG has intertwined the international energy markets more than ever, and what that means for the winter ahead.
