It just keeps on getting ugly for our blue-flame friend, natural gas. Simply put we’re producing a lot, not using much and have more coming from overseas. That means more downward pressure on prices which is good for consumers but not so great for the Houston-centric gas business.
Simmons & Co. notes a couple of reasons in their research note this morning, namely more nuclear power coming online to displace gas-fired plants and cheaper coal prices doing the same:
” … every 1% increase in Nuke utilization translates into a 0.2bcfd negative demand impact for natty – thus, this a ~3-4bcfd negative demand swing m/m.
Update on Coal-Gas Switching: Based on current prompt month NYMEX gas ($4.47/mmbtu) and coal ($45.83/ton), coal is cheaper than natural gas by 12% ($30.28/MWh vs. $34.46/MWh).
And Houston snow not-withstanding, the natural gas storage withdrawal season — when the nation takes more out of storage for use during cool weather than it reinjects — is two weeks overdue thanks to mild fall weather.
Current natural gas storage of 3,837 bcf is 600 bcf, or 19 percent, above normal and 350 bcf (plus-10 percent) of last season’s max.
So, on top of that comes this graph from Houston-based LNG gurus Waterborne Energy.
| Hard to read, but the little red line is the amount of new LNG production expected online by March.
By the end of March Waterborne predicts 120 bcf of new production will be online, about a 15 percent increase in just a few months. That’s enough to fill 40 LNG tankers per month
“US import patterns prior to 2007 were dictated largely by global excess which tended to cause a spike in US import numbers during the summer months as global demand was at its lowest. We expect to see this pattern re-emerge although on a greater scale. Because of the impending length in the global LNG market the potential for significant spikes in US imports is high. We expect to see the first sign of this in the form of a trickle early in 2010 and anticipate we will see larger volumes move to the US this spring and continue throughout the summer.”