Natural Gas – Market Review

Natural Gas – Market Review

Onyx Power and Gas Consulting continues with its weekly series providing the Short-Term Energy Outlook as of September 10, 2019. 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 $2.44 per million British thermal units (MMBtu) on September 5, an increase of 23 cents/MMBtu from August 1 (Figure 9). Natural gas futures prices declined early in August, reaching $2.07/MMBtu on August 5, the lowest price since May 26, 2016, as continued increases in production contributed to inventory gains. As of September 5, natural gas storage injections equaled or exceeded the five-year (2014–18) average in all but two weeks in the 2019 injection season that began in April.

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Henry Hub spot prices increased in the second half of August, and EIA forecasts that prices will average $2.44/MMBtu in the fourth quarter of 2019 and $2.55/MMBtu in 2020. EIA estimates that natural gas production increased to a record-high 92.2 billion cubic feet per day (Bcf/d) in August but expects that production will level off, averaging 93.2 Bcf/d in 2020. However, EIA forecasts that liquefied natural gas (LNG) exports, estimated at 3.9 Bcf/d in August, will continue to rise through the forecast, averaging 6.4 Bcf/d in 2020. EIA expects that continued growth of LNG exports combined with flattening production will provide support for natural gas prices through the forecast.

Ethane prices: On July 31, 2019, ethane spot prices declined to the lowest point on record (Figure 10). Although prices increased in August, the monthly average prices for June through August were the lowest recorded for those months. Ethane inventories rose to 56 million barrels in May 2019 (the latest data available), 14 million barrels more than the five-year average and less than 3 million barrels lower than the November 2017 record high in EIA’s data series, which starts in 2010. The low prices during the summer months indicate that inventories likely have remained high. Ethane produced through natural gas processing continues to increase. Every month since September 2016 has set a production record for that month. Consumption and exports have also increased, but ethane production grew at a faster rate in the first five months of 2019. Although ethane is usually more expensive than natural gas, ethane prices have been lower than natural gas futures prices for more than half of the days from June 1 to September 5. Low ethane prices could make extraction from the natural gas stream cost prohibitive for natural gas processors. Processors will likely leave ethane in the natural gas stream—behavior known as “ethane rejection”—to the extent possible while still meeting the specifications for dry natural gas distribution.

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Disclaimer:

The information provided herein in this content is for general awareness and informational purposes only and does not constitute advice. Our goal is to raise awareness and share knowledge across the energy sector. The content provided here is not intended as a sales offering. For guidance specific to your circumstances, we recommend consulting a qualified professional. You should not place undue reliance on any “forward-looking statements”, which are not a guarantee of future performance. The future results of the energy market are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in any forward-looking statements.

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Thank you for the valuable services you have provided to CLARCOR over the past few years. Onyx has proven itself to not only be very knowledgeable in the energy markets, but also an organization of high ethical standards who has earned my trust.

With the year 2011 drawing to a close, I thank you and Onyx for the services you provided to our organization this past year, and especially for the energy management recommendations. We began implementing those recommendations last spring following an assessment of our spiraling costs of energy

Over the past three years, I have worked directly with Kevin Gooden, President of Onyx Power & Gas Consulting LLC on numerous energy management projects. Their full suite of energy management services is top-notch, and we have been very pleased with the work they’ve done for us as well as our clients.

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