Natural Gas Markets – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues with its weekly series providing the Short-Term Energy Outlook as of December 11, 2018.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

Natural Gas

Prices: The front-month natural gas futures contract for delivery at the Henry Hub settled at $2.77/million British thermal units (MMBtu) on September 6, an increase of 1 cent/MMBtu from August 1 (Figure 9). The Henry Hub natural gas spot price averaged $2.96/MMBtu in August, 12 cents/MMBtu higher than in July. Cooling degree days (CDD) in the United States averaged 13% higher than the 10-year (2008–17) average in August, which contributed to high natural gas demand for power generation.

Figure 9: Natural gas front-month futures prices and actual minus historical average HDD and CDD

U.S. natural gas inventory: Natural gas inventories have been low compared with the five-year (2013–17) average during most of 2018. The low inventory levels reflect high residential and commercial consumption in early 2018 and growth in both liquefied natural gas and pipeline exports over the past year. High natural gas use for electric power generation during July and August also likely slowed the pace of inventory injections. EIA estimates that working gas in underground storage at the end of August totaled 2,606 Bcf, which is 577 billion cubic feet (Bcf), or 18%, lower than the five-year average at the end of August.

The end of October is typically considered the end of the natural gas storage injection season, although injections often occur into the first weeks of November. EIA forecasts that inventories will rise to 3,308 Bcf at the end of October, which would be the lowest end-of-October natural gas inventory level since 2005 (Figure 10). Despite low inventory levels, price increases have been moderate. Significant month-over-month production growth in 2018 helped keep futures prices lower than $3/MMBtu for most of the summer. Total U.S. dry natural gas production reached an estimated 82.2 billion cubic feet per day in August. Implied volatility, which is based on futures and options, has also remained low, indicating lower expectations by market participants for large price increases in the near future.

Figure 10: Increase in U.S. natural gas inventory from August to October

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing. Volatility in the energy markets makes it too precarious to take chances. Partner with Onyx Power & Gas in Making Energy Make a Difference!

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