Energy Market Update-April 2018
Edge Insights energy experts are constantly monitoring energy market conditions in order to help ensure the best possible pricing and contract terms for our clients. The following report is a snap shot of current conditions intended to help our clients stay informed of market dynamics.
Natural Gas Market Overview:
Lower natural gas prices over the past few weeks have led to an increase in use of gas for electric generation. Production is strong, now almost 20% higher than last year. Natural Gas exports reached a high in February with an estimated 10.7 BCF, but expected to drop back to 9.9 in April.
We’re watching to see what affects the proposed import tariffs could have. The decisions would be “inconsistent with the administration’s goal of continuing the energy renaissance and building world class infrastructure,” said American Petroleum Institute CEO Jack Gerard. “The U.S. oil and natural gas industry, in particular, relies on specialty steel for many of its projects that most U.S. steelmakers don’t supply.
Current Market Movers:
- This time of year, we generally see a pullback of market prices. This is an expected bearish sentiment, as we approach the shoulder season and reduced demand.
Bullish: (higher prices)
- Short term; 3 to 4 week forecasts shows a cool period for the northern tier stretching to Maine. This will cause an extended storage withdrawal season and add support for market prices. (see outlook map)
- Natural gas storage levels are below the 5 year average with an expected volume of 1,350 Bcf by mid-April. The 5 year average is over 1,700 Bcf.
Natural Gas Storage Update:
The storage report for week ending 3/23 shows a withdrawal of 63 Billion Cubic Feet (Bcf). This puts levels at 20% below the 5-year average by 346 Bcf, and 672 Bcf below last year at this time. Current percentage of total capacity is now at 31.6% with 2 weeks of the official heating season remaining.
The following is an excerpt of an article published on the EIA.Gov website.
In 2017, the United States saw substantial increases in exports of all fossil fuels, with exports of crude oil (89% higher than in 2016), petroleum products (11% higher), natural gas (36% higher), and coal (61% higher) all increasing over the prior year. Exports of crude oil and petroleum products both reached record levels. Petroleum products such as gasoline, distillate fuel, propane, and other fuels currently make up the largest share (54%) of U.S. energy exports.
Source: U.S. Energy Information Administration, Monthly Energy Review, Table 1.4a & 1.4b
Note: Other energy exports represent less than 2% of total.
The United States became a net exporter of petroleum products in 2011 and natural gas in 2017. In 2017, the United States was a net exporter of coal, coal coke, petroleum products, natural gas, and biomass, but a net importer of crude oil. Net electricity trade with Mexico and Canada was relatively minimal.
An increase in total U.S. energy production contributed to the decline in net imports in 2017, led by production increases in renewable energy (8%), especially hydropower and wind, as well as production increases in coal (6%), natural gas plant liquids (6%), crude oil (5%), and natural gas (1%). Total U.S. energy consumption was virtually unchanged from the previous year’s level.
We determined the same buying opportunities as last month. Short contract ranks good as we near the shoulder months of spring, while long term contracts continues at a good to excellent.
The market opportunity is a ranking of how we perceive timing of contract purchases or hedging natural gas or electric.
Information provided by the Energy Division of Edge Insights, Inc