Natural gas market trends show summer US prices running flat to year-ago period: NGSA

The US natural gas market is expected to see neutral price pressure this summer compared with last summer, which saw an average price of $2.92/MMBtu, the Natural Gas Supply Association said Thursday.

The NGSA made the prediction in its 2019 Summer Outlook, which forecasts pricing trends based on an analysis of the weather, national economy, consumer demand, production and storage inventories.

“Our expectation for flat price pressure is based on a forecast for impressive growth in exported liquefied natural gas (LNG) and very large weekly storage injections, which will place upward pressure on natural gas wholesale prices,” according to NGSA. These bullish factors will be “counterbalanced by cooler summer weather and very high production placing downward pressure” on prices, it added.

Citing data from the US National Oceanic and Atmospheric Administration, NGSA predicted summer weather in the continental US will on average be 14% cooler than last summer, but 3% warmer than the 30-year average. Compared with last summer, the total number of cooling degree days (CDDs) is expected to be significantly less than in summer 2018, which is expected to be bearish for demand and prices.

For the seven-month summer cooling season of April through October, 1,272 CDDs are predicted for this summer, compared with 1,477 CDDs last summer, NGSA said.

Gas demand is projected to reach an all-time summer record this year, according to an independent demand analysis by EVA, which forecasts average summer demand of 82.1 Bcf/d, compared with 79.6 Bcf/d last summer – about a 3% increase.

LNG exports are set to account for the largest expected increase in demand this summer. EVA forecasts LNG exports will almost double from 3.3 Bcf/d in summer 2018 to 6.0 Bcf/d in summer 2019, with a number of export projects expected to become fully operational this year.

In addition, US pipeline exports to Mexico are expected to increase by just under 1 Bcf/d to 5.5 Bcf/d this summer, NGSA said.
2% DECREASE IN POWER BURN SEEN

This summer is expected to see a 2% decrease in gas power burn compared with last summer. The cooler summer is forecast to result in a small decrease in demand from the residential/commercial sector too. Some minor growth is, however, forecast for the industrial market.

IHS Economics projects industrial growth of just over 1% this summer compared with last summer’s growth of 2.5%, driven in part by manufacturers’ uncertainty around tariffs.

“When all sectors are combined, overall demand is projected to be 2.5 Bcf/d (3.1%) greater than 2018’s record summer demand, thus placing neutral pressure on natural gas prices compared to last summer,” NGSA said.

When it comes to storage inventories, NGSA projects about 3.75 Tcf of gas will be in storage by the end of the 2019 injection season, which would require an average weekly injection of 85 Bcf, a significantly higher injection level than last summer’s average weekly injection of 60 Bcf.

“The difference in the size of the weekly injections between the summers of 2018 and 2019 is expected to place upward pressure on natural gas prices this summer,” NGSA said.

Meanwhile, robust production compared with last summer is “likely to result in downward pressure on natural gas prices,” it added in the outlook.

NGSA forecasts domestic gas production this summer of 89.4 Bcf/d, compared with last summer’s 82.6 Bcf/d.

The national economy is expected to have a neutral impact on gas prices compared with last summer. “GDP is expected to increase by a steady 2.5% compared to the summer of 2018, when GDP expanded by 2.9%,” NGSA said.
Source: Platts