Western Price Survey
February 19, 2016
Continuing oversupply conditions are constricting natural gas prices, and suppressed prices will likely persist into summer.
"Cash prices may be in for a rough rest of the quarter as resilient production comes head to head with storage drawdowns, which will chase limited demand," noted Barclays analysts in a Feb. 15 report.
Working gas in storage is expected to be 2,164 Bcf by March 31, which would be a near-record level for the end of the heating season. This may put "tremendous pressure on the rest of the contracts in 2016, especially the October one, as the market fears another year of oversupply," noted Barclays. "However, we see a buying opportunity in the likely shoulder season sell-off, given our view that as production slows in 2016 and new demand enters the market, balances will tighten."
Working natural gas in storage was 2,706 Bcf as of Feb. 12, according to U.S. Energy Information Administration estimates. This is a net decrease of 158 Bcf versus the previous week. Storage levels are now 24.5 percent greater than a year ago and 25.8 percent greater than the five-year average.
Although natural gas consumption increased 5.8 percent in the EIA report period, the uptick resulted from residential/commercial use, up 6.3 percent week over week. Natural gas used for power generation fell 8 percent week over week.
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Henry Hub gas spot values tumbled 24 cents in Thursday-to-Thursday trading, ending at $1.88/MMBtu Feb. 18. Markets were closed Feb. 15 in observance of the Presidents Day holiday.
Western natural gas average values fell between 13 and 31 cents over the trading week. Sumas posted the greatest loss, down 31 cents to $1.50/MMBtu. Prices Thursday ranged from $1.21/MMBtu at Alberta to $2.02/MMBtu at PG&E CityGate. The latter hub was the only Western hub with a price higher than $2/MWh.
Meanwhile, Western peak power prices moved nominally in Feb. 12 to Feb. 19 trading. Mid-Columbia added 80 cents to reach $14.65/MW, while South of Path 15 fell $3.50 to $23.05/MWh.
Nighttime power values saw similar movement. Mid-Columbia added $1.10 to hit $14.20/MWh, while Palo Verde fell $1.40 to $16.60/MWh.
Demand peaked on the Cal-ISO grid at 30,052 MW Feb. 16, which should be the week's high. Total renewables production on the Cal-ISO grid reached 9,599 MW Feb. 18. Solar generation reached a record-high instantaneous peak output of 6,541 MW Feb. 16.
The California snow-water equivalent measured 20.4 inches, or 74 percent of the April 1 average, as of Feb. 18, according to the California Department of Water Resources. Snowfall at midweek returned the measurement to Feb. 1 levels after some melting [Linda Dailey Paulson].
Archives of the Western Price Survey for the past year are also available online.
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