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:

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.

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.

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: