Western Price Survey
May 6, 2016
Improved market fundamentals are bolstering the perception among traders that the natural gas market is entering a bullish phase.
"Although high storage levels continue to weigh on cash and prompt prices, sentiment is clearly turning more bullish later in 2016 and into 2017," Barclays said in a May 2 analyst note. "The natural gas bull thesis . . . points to prices moving higher in 2016 and 2017 as the market becomes focused on falling production levels and increasing demand."
January 2017 futures prices remain more than $1 above current spot prices, according to the U.S. Energy Information Administration. "During the most recent storage week, the average natural gas spot price at the Henry Hub was $1.90/MMBtu, while the Nymex futures price of natural gas for delivery in January 2017 averaged $3.04/MMBtu, a difference of $1.14/MMBtu," EIA said in its weekly gas update. "A year ago, the premium was 47 cents/MMBtu, suggesting there is more financial incentive this year to buy and store natural gas in the summer for sale in the winter."
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Working natural gas in storage was 2,625 Bcf as of April 29, according to EIA estimates, a net increase of 68 Bcf compared to the previous week. Storage levels are now 48.8 percent greater than a year ago and 46.7 percent greater than the five-year average.
Henry Hub gas spot values gained 14 cents in Thursday-to-Thursday trading, ending at $2.04/MMBtu May 5. Southern California Border gas picked up 18 cents to end at $1.98/MMBtu Thursday.
Daytime power prices were relatively flat in April 29 to May 6 trading, Western peak prices gained between 50 cents and $1.70. California-Oregon Border posted the greatest gain, adding $1.70 to $20.30/MWh. Average nighttime power prices varied, with Northwest values dropping as much as $7.80 in Friday-to-Friday trading.
Demand peaked on the CAISO grid at 30,241 MW May 3, which should be the week's high. Total renewables production on the CAISO grid reached 11,742 MW April 29. Total solar production reached 7,565 MW May 1, while thermal generation peaked at 13,969 MW May 3.
Western natural gas values were lower by roughly 50 cents/MMBtu in April compared to the same month last year; however, PG&E CityGate was lower by about 85 cents. Western power prices in April were between $6.75 and $13.35/MWh less on average than during the same month in 2015 [Linda Dailey Paulson].
Archives of the Western Price Survey for the past year are also available online.
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