Late July Energy Market Update

Published: July 26, 2017

Reasons to Buy:

  • Weather normalized demand continues to grow.
    • Several new LNG facilities coming online in the next year.
  • Market will turn bullish quickly depending on how hot it gets (cooling demand.)

Reasons to Wait:

  • Current forecasts for average summer temps may keep 5 year surplus intact heading into winter.
    • Market fell overnight on expectations of lower cooling demand in the coming weeks.
  • With natural gas production growth projected and significantly higher rig counts versus last year, the market could fall if incremental demand doesn’t keep up.
    • 186 gas rigs (-1 this week) vs. 88 gas rigs last year.

Gas Market Highlights:

  • Last week was the 15thstorage report and 15th injection of the 2017 Injection Season.  Injection (28 BCF) was within analysts’ expectations (25-40).  Storage is now 299 BCF below last year’s level and 141 BCF above the 5 year average.
    • Year over year deficit has increased 3.5% since the previous week.
    • Surplus over 5 year average has decreased 18.0% since the previous week.

  • August 2017 NYMEX trading at 2.899 after opening at $2.914.

Weather Highlights:

  • Next 7 days:
    • 0.5-2 above normal for the Midwest, 0-3 below normal in the Northeast.
  • Week following:
    • 0-3 below normal for most of the US.

Note:  Although natural gas does not necessarily indicate where electricity pricing is at, it is good as a general barometer for electricity markets as a whole.  When gas gets expensive, so does electricity generated from natural gas.

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