Tuesday, January 17, 2017

Nuclear Power Output is Identical Year-on-Year

Today's nuclear capacity factor is 95.8%, the same as this date last year.  It has been comparable for the last ten days.  Last year, the capacity factor started falling on Jan 24, with some short term outages that led into the spring refueling and maintenance season in February.  Unless some unplanned maintenance is required, the last week in January of this year could outperform last year, offsetting some gas demand.

The gas equivalent of the difference between this year and last year has been very slight for the last ten days:

Friday, January 13, 2017

Rig Counts: Oil Rigs Down 7, Gas Gains 1. Sharp Rise in Canadian Oil & Gas Drilling Activity

Holiday effects might be dampening the upward trend in US oil drilling, which was down 7 this week.  As for major basins, Barnett lost an oil rig, Eagle Ford gained 1, Granite Wash lost 1, Permian gained 1, Williston lost 1.

Gas rigs were up 1.  Nonmajor plays added 5, so the net effect was a decline in drilling potential.  Utica and Marcellus each lost 1 rig.  Haynesville and Eagle Ford both lost a single gas rig as well. 

Canadian rig counts surged on post holiday seasonality, pushing both counts to the highest in almost two years:

Thursday, January 12, 2017

Henry Hub Comparisons

Just a quick reminder that Henry Hub Spot Price went below $2 in mid-Feb, and didn't recover above $2 until June.  That's going to make the coal vs gas competition a very different equation this year:

EIA Natural Gas Inventory: Large Draw Lifts Prices

Working natural gas in underground storage fell by 151 BCF last week, about 6-7 BCF more than consensus expectations.  Prices were already up substantially prior to the release, on colder forecasts for late January.  And prices were up another 5-10 cents after the EIA information was published.

The forecast remains much much warmer than normal for the next two weeks, with low heating and electrical requirements.  But a confidence interval is still probably centered on 1.7 TCF as the winter storage carryout in March, and that's currently supportive of the strip pricing, with production flat and the export/import balance steadily shifting toward net exports.  

A third LNG train is expected to begin taking gas around April, and pipeline exports to Mexico are steadily creeping upward with each new pipeline expansion.  So unless extreme warmth persists, and/or production suddenly begins another step up, the tightness should keep the gas strip comfortably above the $3 mark.  

Wednesday, January 11, 2017

Gas to Coal Switching: Reducing Gas Demand By More Than Expected

With each day that gas prices remained elevated compared to last year, the short term effects of hedging, contract commitments, and other temporary factors wear off, and we begin to see the fundamental economics for power generation.  Yesterday ERCOT reported it's fuel mix for December, and natural gas lost more than 1.3 BCFE per day to coal.  
In MISO, the numbers reveal themselves daily, and the impact is also more than 1 BCFE per day.  This suggests that the total impact of switching must be in the 5+ BCFE per day range nationwide.

Here's a look at the daily effects in MISO.  First of all, we see that the daily thermal power demand in December was comparable, year on year.  To wit, it was about 364 BCFE in Dec 2015, and 370 BCFE in 2016.  Close enough for government work:

That thermal generation demand was split between Natural Gas and Coal as follows: