Thursday, April 27, 2017

Southern Power Pool: Natural Gas Rapidly Gained Market from Coal in April

For multiple reasons, SPP has been using substantially more gas and less coal this month.  Even though total generation, and thermal generation, are not up but down, the dispatch curve is suddenly favoring gas again.  Gas achieved its highest 1-day share in two years yesterday, at about 45% of the thermal power market.

As the heat begins to build, this trend will be important to track.  Last year gas was cheap.  Very cheap.  Until mid-summer.  This year, it seems that coal's price advantage isn't helping (In SPP specifically), so when that YOY comparison fades in June, will gas make new utilization highs?

Wednesday, April 26, 2017

Changes in MISO Natural Gas Market Share

Further to a previous post, higher gas prices and lower overall power demand have shifted the gas demand curve, and steepened the slope.  At lower aggregate demand, gas market share of carbon based power generation is much below 2016:

Nuclear Power Plant Outages Continue at Nearly 1.5 BCFED Over 2016

Nuclear power plant refueling and maintenance season continues with nearly 1.5 BCFED more power offline than last year at this time.  Outages should bottom out in the next two weeks as plants return to service for summer cooling season.

Tuesday, April 25, 2017

MISO Natural Gas Demand Struggles, as Total Demand Also Struggles

Total load in MISO this month remains anemic.  The lowest loads of the year, and the lowest April average load in many years, is holding down fossil fuel potential.  So far this month, there has not been a single day with load above the April 2016 monthly average!

With gas also losing market share to coal on price, usage of this hydrocarbon is down about 15% MTD. 

Thursday, April 20, 2017

Natural Gas Inventory Builds Too Much

Today's natural gas inventory build of +54 BCF was above expectations, but gas didn't sell off too much, just down 2-4 cents.  

Inventories are high, but production has been stubbornly low.  Everyone is awaiting an expected surge in output, but projections continue to be revised lower, or rather 'later'.  

Exports have been price supportive, and imports from Canada, though high, are at the expense of Canadian storage inventories so it can't go on indefinitely.  

Losses of power burn market share to coal have been in line with consensus expectations, on the order of 3 BCFD so far this shoulder season.  Gas demand has been severely hurt by western hydro output, but helped by nuclear outages, both of which should persist for months (hydro more so).  

Wednesday, April 19, 2017

Natural Gas Storage VS Average

Here's another perspective on natural gas storage.  This is the relationship to the 5 year storage average.  Last year on this date, we were at the 5 year max, 679 BCF above the average.  This year, the anomaly has risen to 263 BCF from zero at Jan 1.

The grey region is the 5 year min-max deviation, which is revealing in that it shows how well the supply-demand balance guides inventories toward equilibrium by the end of injection season in November:

Tuesday, April 18, 2017

Alberta Gas Production Rises in April, Averaging 0.2 BCFD Above April '16.

Whether seasonal factors and timing, or a fundamental shift is taking place, TC Nova pipeline receipts in April are up from Feb and March, and are now above 2016 levels.

Output normally declines in May, and we will soon see whether the same pattern prevails in 2017.  If the higher rig counts are translating into more molecules, it could reverse the inventory trend we have seen since January:

Monday, April 17, 2017

Southern Power Pool: Natural Gas Market Share Declines in April (vs April 2016)

In SPP, a few bad things are happening for natural gas.  Total demand for carbon fueled power generation is down by about 2GW in April, and gas has lost market share to coal, from around 36-40% of thermal output last year, to 27-31% of thermal output this year.

The two primary culprits are (1) increased wind output and (2) higher natural gas prices.

Here are the poly lines for April '16 and '17, showing market share for natural gas:

The daily demand for carbon fueled power, with a 30-average line, for 2016 and 2017:

Wednesday, April 12, 2017

MISO: Gas Market Share of Thermal Generation = Down from 42% Last April to 34% This April

Much higher natural gas prices this year have made gas less competitive against coal in the MISO region.  MISO publishes excellent daily fuel mix statistics, unfortunately they also show that total load is down about 7% so far in April.  Most of that generation loss has been offset by declines in wind and nuclear output, but on average the wind will blow again, and nuclear power will return from maintenance.

Here's total output vs last year, for the last six months.  Load has been below the prior year in all but one month (December 2016).

Tuesday, April 11, 2017

ERCOT Reports March Fuel Mix

ERCOT's Demand and Energy Report for March 2017 was released yesterday.  It shows natural gas gained against coal:

But it also shows that the thermal power pie continues to shrink:

One big reason, besides low/no demand growth, is wind.  A big new generation record was set in March:

Monday, April 10, 2017

Texas Drilling and Permit Activity: Drilling Steady, Permitting Way Up

Completions have not yet accelerated, but permitting really took off in March, per the Texas Railroad Commission Drilling, Completion, and Permitting Report for March 2017:

Permits issued in March rose to 1,233 from about 930 in each of the three previous months (Mostly Oil permits, fewer Oil+Gas permits, and very few Gas permits:

Only 63 gas wells were completed in March.  Oil activity was much greater, at 475 new well completions, but still well below March 2016 (876 completions).

Friday, April 7, 2017

CONUS Winter a Bust. Now Almost 600 HDD's Below Normal

With winter drawing to a close in the continental US, the final verdict is very, vary warm.  Since Oct 1, we are nearly 600 HDD's below normal, and if next week's forecast holds, we will be on par with last year's warmth.

Monday, April 3, 2017

Nuclear Capacity Factor Drops Sharply, Requiring 1.5 BCFD+ of Extra Gas Power Burn

Substantial new outages over the weekend have resulted in a decline of over 3% in nuclear power output from Friday, and it equates to over 1.5 BCFD of gas replacement vs this date last year:

Wednesday, March 29, 2017

Lower 48 Oil Production

Today's EIA Weekly Petroleum Report shows an unsurprising continuation of the upward production trend that suggests we will keep rising for some time, perhaps breaking 10 million barrels per day by year's end.

Monday, March 27, 2017

Nuclear Power Output Stabilizes, Near 2016 Levels

As we move through refueling and maintenance season, nuclear power output levels should continue to drop, but the outages have not outpaced 2016 by much so far.  April should see larger year-on-year differentials, at least that's what is expected.

High Gas Prices Take Toll on Power Burn Market Share in MISO

The most recent two days (March 25 and 26) are in RED below.  Not only are total gas demand levels quite low, they reflect a loss of market share to coal of about 10 points vs last year:

Monday, March 20, 2017

Nuclear Refueling Begins: Large Drop in US Nuclear Capacity Factor Over the Weekend

Nuclear power output capacity factor dropped from 88% to 82% over the weekend, as units came offline.  That improves the power burn potential for natural gas, and a full gas replacement of the lost nuclear output would see about 1BCFD more gas being burned today than on this day last year.  This imbalance is projected to persist for some time.

Sunday, March 19, 2017

MISO Coal to Gas Switching Snapshot: March 2016 vs 2017

Load-adjusted, gas is averaging about 5 points of thermal marketshare below last year in March.

The slope is also different, with market-share varying more directly with overall thermal load size.  With lower demand anticipated as weather moderates in the back half of March, the market share loss should be more pronounced, since thermal demand in the 8-10 BCFE range is showing a gas share around 37%, vs last year at 43%.

Compounding this loss for natural gas is the higher wind output experienced in MISO.  Average daily wind output is 185 GWH this month, vs 135 last March.  That's a MASSIVE difference, displacing something on the order of 400 MMCF per day.  (The increased wind output isn't just in MISO either, it is big in SPP and ERCOT)

Saturday, March 18, 2017

Solar Power: Small Beginnings that Matter Quickly

Texas is late to the utility-scale solar power game, but keep one eye on these small beginnings.

It takes perhaps 120 GWH per day to displace a BCF of natural gas, so a tiny number like 6 GWH seems insignificant.  But capacity will grow quickly against a backdrop of low/no load growth, and say 20 GWHD still adds up to 60 BCF per year in gas offset.  With summer sun, and more capacity, coming quickly in the ERCOT region, this graph may take on an interesting slope soon....

Thursday, March 16, 2017

MISO Natural Gas Market Share Continues To Steal From Coal

High loads have helped, but in general natural gas is regaining market share from coal since mid-February.  It is not just a few percentage points below 2016 levels, despite a higher market price.  This should help keep a floor under gas prices so long as weather doesn't abandon north america completely this summer:

Tuesday, March 14, 2017

Winter Heating Requirements Weak Despite Cold Spell

This winter is barely keeping pace with last year's anemic performance.

Through the 3/20 forecast period, we are just 67 HDD's ahead of last year (OCT-MAR), and a full 504 HDD's behind the 20 year average:

Monday, March 13, 2017

Western Canada Natural Gas Storage Surplus Eliminated

A combination of colder weather, higher exports, and lower production have more than eliminated the 40 BCF surplus that western Canada started the year with.  It is now a growing deficit, though weather is moderating quickly from here on out and the big daily storage draws should be history by mid-week.

Friday, March 10, 2017

Coal-to-Gas-to-Coal Switching in the Midwest (MISO) Region

We saw clear and prompt evidence of a switch from gas to coal as power generation feedstock in MISO when gas prices began their sharp rise in late NOV 16.  Then again when prices fell in FEB 17.

Now, with strip prices back above $3 (but HH Spot lagging at the moment), will we see a reversal back to coal domination?

Not yet.

Here are two angles on the question.  The first is the demand adjusted scatter plot, which is indicating that gas is within about 5% of the thermal power market share it held last March, when gas prices were below $2.

The second shows the daily market share of thermal power generation since last November.  Gas was at a 40% market share vs coal back in early November, and then dropped as low as 25% around New Year's Day.  It started rising steadily at the beginning of February, and was near last year's levels, around 40%, by March.  It's been maintaining a high 30's share, clocking 38.4% yesterday.

As higher strip prices translating into the spot market, shouldn't we see gas lose marketshare?

Thursday, March 9, 2017

ERCOT Reports February Generation Fuel Mix

ERCOT released their Demand and Energy Report for February 2017 today, and the results are both expected and alarming.  Total generation was off about 2.6% from last Feb, likely due to weather.

My focus was on two things:

Wind power generation....capacity is up from 2016, and the capacity factor seems to be up even more (next gen windmills, better siting?).  In any case, wind generation was up 19.4% over last Feb, from about 6.7 GW average, to 8 GW.  The difference is even larger in March to date.

Market share of thermal was 60.9% this Feb, vs 64.4% last Feb...down on lower total load and losses to wind.

Natural gas market share of thermal was 50.7% this Feb vs 67.1% last Feb.  Gas was much more expensive this year.  Falling prices in March should improve this a bit, but last March, gas took a whopping 79.3% of the thermal power market.

Monday, March 6, 2017

Nuclear Power Refueling and Maintenance Season Begins. More Downtime than '16 Expected

A large number of reactors are going down for Spring refueling this year.  Currently the difference between 2016 and 2017 outages isn't significant, but we should see it grow quite a bit over the next 90 days:

Friday, March 3, 2017

Alberta Gas Production Level at 11.2 BCFD, Storage Withdrawals Strong

Field receipts on the TC Nova system in Alberta have been near 11.2 BCFD for the last 12 days, which is around 1/4 BCF below last year's average for the same period.  

Meanwhile, year to date withdrawals from storage total 58 BCF, far exceeding last year's 17 BCF.  This brings western Canadian storage to about even with last year, as a 40 BCF surplus at Jan 1 has been worked off.  Cold weather should be moderating in the province this week, so likely the storage withdrawals will ease back and we may see the beginning of injection season, since gas demand south of the border will also be very low after this weekend.

Thursday, March 2, 2017

Henry Hub Spot Price Comparisons

As shoulder season approaches and gas prepares to battle with coal for power generation market share, here is the current scenario:

Gas has been taking back significant market share from coal since prices began dropping two weeks ago.  But contango still reigns, and the summer is priced a little too high for gas to seize the massive market share it took from coal last spring/summer.  

Gas production remains subdued relative to last year, and to expectations.  That will be very supportive if the trend continues, but 1Q reports by E&P's suggest it will not, at least in Q3+.  

If production begins to bound forward, prices will likely come under downward pressure because:

  • Hydro surpluses will destroy 1BCFD or more of gas demand all summer
  • Renewable energy (solar and wind) will grow by about that same amount again, displacing around 1 BCFD of gas demand.
  • Weather was warmer than normal last year (see previous post), which will drop NG demand if we experience a normal summer, perhaps by more than 1 BCFD.  
Obviously this is all against a backdrop of positive variables as well, such as LNG exports and pipeline exports to Mexico, which are all up significantly.  And of course some coal plant retirements.  The economy could also generate some incremental demand due to GDP growth stemming from either a recovery or stimulus.  Lastly, we should see steady small upticks in industrial demand due to long lead time projects coming into service.

Also note how year-on-year pricing improves beginning in June.

Wednesday, March 1, 2017

A Mighty Wind

Wind power is growing and will grow above trend in 2017.  Electricity demand is not growing.  If wind steals an additional 1% of market share in '17, what feedstock will pay the price?  Hint:  not nuclear, hydro, solar, or even coal.

From the EIA Electric Power Monthly:

Cooling Requirements for Upcoming Summer

As gas demand is modeled for 2017 summer, note that there were about 200 more cooling degree days than normal last year, back-loaded after a cooler than normal start in April-May:

Tuesday, February 28, 2017

Cheap Natural Gas Stimulates Mid-Continent Fuel Switching

MISO Electric region has been quick to respond to changing gas prices, on the way up and now back down.  Gas is quickly recovering the market share lost to coal since gas prices began rising in November:

Yesterday's large increase in gas fired power generation set a big new high for the month of February, and put it on par with last February, despite current prices being 75 cents higher than last year.

This suggests that despite the weak weather, low aggregate power demand, and rise of renewables, and expected production bolus, it may be difficult to pierce a lower price boundary during the shoulder season.  If $2.50 gas stimulates the same power burn demand as last year's sub $2 pricing, then it should be more than adequate to keep inventories in line.

We still have a few more weeks of weather influence before the mildness of late march limits cold spikes, so volatility can still prevail.

Saturday, February 25, 2017

Why is the Natural Gas Forward Strip Price Cheap and Getting Cheaper?

Even though it seems impossible that our government could issue such a forecast, here is the February Short Term Energy Forecast for Natural Gas Marketed Production.  It projects that just 22 months from now, production will rise from 76.9 BCFD to 85 BCFD.  That seems far fetched, but it may not be far from consensus.  If this prevails, we will see low $2 gas in all likelihood.  But I don't consider it likely that we will hit these production milestones.  

Anything close to these output levels will devastate the gas market.  There is no outlet for this gas beyond slight upticks in LNG capacity, and a mild, 1 BCFD increase in pipeline exports to Mexico.

However, the EIA has made large downward revisions recently to it's forecasts.  Here is the same forecast shown above, but with the same actual/forecast estimates from Aug '16 (6 months ago).  The Feb '17 production forecast has dropped by 3.2 BCFD!

Tuesday, February 21, 2017

Natural Gas: The Cure For Low Prices

The case study that is MISO coal/gas switching continues to reflect the dynamics of a changing price environment for gas.
The very recent crashing prices are sparking, as it were, a resurgence in gas fired power generation.  

Although there is no gas price so low that it stimulates cold weather, the recent days have seen gas retaking market share, with yesterday's demand adjusted market share at 30%, which is double the February average, and within 6% points of the levels of last November, when gas was around $2.75.  We should see abrupt increases in market share all week, if the December price spike is any indication of the rapidity of the price response.

Sunday, February 19, 2017

Warmest Weather In Decades Suppressing Natural Gas Demand

I suppose the fact that gas is still near $3 despite a -400 HDD anomaly this winter is a testament to the improving fundamentals.

Nevertheless, forecasts for the next two weeks keep getting warmer, and it will feel like late April across much of the CONUS:

Saturday, February 18, 2017

Coal to Gas Switching in MISO, Beginning to Reverse?

Natural Gas usage for power generation in the MISO region continues to be much below 2016.

Back in November, gas was near 40% of the carbon power market in MISO, and well above the prior year as well.  With the price rise in late November, the situation reversed.  That situation was enhanced of course by low aggregate demand due to mild weather.  

With prices falling and now breaking through $3.00, it seems that gas will regain much of that lost market share, though probably not comparable to last year as prices were more like $2.00 then:

Friday, February 17, 2017

Haynesville Shale: Rig Counts Rise +3 to 34, vs 15 Last Year. Gas Production Outlook?

Rig counts have been steadily rising in the Haynesville Shale for a very long time now.  The production response has been muted/sluggish/nonexistent thus far.  

Louisiana has a well production reporting system that has a 4-5 month lag before data is substantially complete, so November '16 is solidifying now, and it shows a slight uptick in daily production, though the plateau in output that prevailed for the prior 15 months hasn't been decisively broken.  

The two parishes that contribute the lion's share of output (70%), Caddo and DeSoto, are shown below as well.  The long lag in reporting makes this data fairly backward looking, but even so.