Tag Archives: gas prices

Natural Gas Prices Continue Their Downward Spiral

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We’ve hesitated to recommend switching gas suppliers for a few years now based on not knowing when gas  prices hit bottom. This article from Bloomberg tells the story:

February 18, 2016 — 9:15 AM EST Updated on February 18, 2016 — 2:39 PM EST

Stockpiles were 25.8% above five-year average as of Feb. 12
Mild weather seen in lower 48 states through early March

The heftiest U.S. natural gas surplus in four years is getting bigger by the week, pushing prices to the lowest level since December.

government chart on gas stockpile

Natural Gas Stockpile Statistics

Stockpiles were 25.8 percent above the five-year average in the seven days ended Feb. 12, compared with 23.4 percent in the prior period, government data released Thursday showed. The glut has expanded for three straight weeks.

 

Mild winter weather is limiting heating demand for gas, sending prices down about 20 percent this year and expanding the biggest inventory surplus since 2012. Unless late-season cold erodes stockpiles, oversupply will linger into the second half of the year, pressuring futures lower.

“The bulls have been waiting for demand to turn around and eat into this giant storage glut, but it doesn’t look like that’s going to happen,” said Aaron Calder, an analyst at Gelber & Associates in Houston.

Natural gas for March delivery fell 9 cents, or 4.6 percent, to $1.852 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Dec. 18.

No deep freeze is forecast for the lower 48 states through early March, according to Commodity Weather Group LLC. Stockpiles dropped 158 billion cubic feet last week to 2.706 trillion, compared with the five-year average withdrawal of 170 billion, Energy Information Administration data show.

“Stockpiles are more than 20 percent above the five-year average now, and it’s only going to get uglier,” said John Kilduff, a partner at Again Capital LLC in New York. “The weather forecasts are getting worse and worse for the bulls.”

Well it still makes sense to stick with the local utility company as those rates are variable and will continue to drop with the market. With summer around the corner, rates should go even lower as usage declines. Perhaps in the heat of the summer it may pay to check into what fixed rates are being offered in order to lock into some low prices for a few years.

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Gas Price Outlook For 2016

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I was actually surprised that this article didn’t say anything about the need for gas to replace electricity generation as many coal plants go offline. Also, with the potential for a new president approving the Keystone pipeline, that would certainly have some bearing on the gas price outlook.

gas being used for heat

Will LNG exports and globalization impact U.S. natural gas price forecast?

The answer to the above question is yes, so let’s look at exactly how that will happen.

The Evolving LNG Market

There’s been a dramatic increase in LNG exports between 2004 to 2014. The increase has led to a much more bearish outlook for gas compared to that of oil so it’s a buyer’s market. Australia should become the largest LNG producer in the years to come while the U.S. should become the 3rd largest.

The Impact on U.S. Natural Gas Prices

According to Francisco Blanch, head of commodities research at Bank of America Corp, “Connecting U.S. natural gas prices, could result in wider spreads at home.” He goes on to say that the “futures for January 2017 are already trading at a 35.7 cent premium to that of January 2017 futures, which is the biggest spread since 2012.”

In May of 2012 the New York Mercantile Exchange (NYMEX) settlement rate is that of where prices are trading currently, and by the end of 2012 the NYMEX settlement rate closed in the $3.35 range. Decreased production and a hot summer were the key influences why prices rebounded late in 2012.

Will the rest of 2016 be a carbon copy of 2012?

Personally, I think natural gas prices will go up in 2016. The biggest drivers in price will be the U.S.’s LNG exports finally moving forward and an expected hotter summer this year. [4] We should focus on how much LNG exports impact our prices at home, and we all know that higher demand increases prices. Thus the question for the natural gas price forecast becomes, just how much will prices go up?

Read the entire article at: http://blogs.inciteenergy.com/inciteblog/what-wikipedia-cant-tell-you-about-the-natural-gas-price-forecast

Sources:

The Economist-Natural Gas “Step on it” January 30, 2016 from the print edition,

http://www.economist.com/node/21689644/print

Bloomberg “Gas Prices Will Be Affected by LNG Exports” July 30, 2015

U.S. Energy Information Administration, http://www.eia.gov/

NOAA, Climate Forecasts- Jul-Aug-Sep 2016 http://www.cpc.ncep.noaa.gov/products/predictions/long_range/seasonal.php?lead=6

I think that trying to determine the gas price outlook from the information provided and otherwise available is a very mixed message.

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