Factors Driving the Short-Term and Long-Term Energy Markets

Bear Drivers: Factors Driving the Market Down 

Short Term:                                                                                                                                                                                                                                                   

  • Total Net US Natural Gas Supply is marginally lower at 82.6 Bcf/d vs. the week prior; supply is up year over year 7.0% or 5.7 Bcf/d. 
  • According to Baker Hughes data, oil and natural gas rig counts are up 224 rigs vs last year. 
  • Mild temps expected for much of the US for the remainder of Winter 2018; short term temperature forecasts call for above average temps in the East and South.

Long Term

  • FERC approves 5 new natural gas pipelines and pipeline expansion projects in the Northeast in October 2017 
  • Future natural gas pipeline expansions from the Appalachian region total 15.65 Bcf/d with approximately 3.5 Bcf/d currently in operation. 
  • Pennsylvania natural gas production is up 25% to 15 Bcf/d vs. last year raising the region to 19% of total U.S natural gas production 
Bull Drivers: Factors Driving the Market Up

Short Term:

  • Total demand for natural gas is down 13.8 Bcf/d to 86.8 Bcf/d vs last week. Residential and commercial customer demand for natural gas decreased by 26% vs. last week; demand for power burn decreased by 8% vs. last week; although demand is significantly lower this week, it is still exceeding supply providing price support. 
  • LNG exports totaling 17.2 Bcf/d have left the Sabine Pass LNG liquefaction facility. Dominion Energy's Cove Point LNG terminal in Maryland is expected to start exports in Spring 2018. 
  • Natural gas storage is expected to end the withdrawal season nearly 20% lower than the five-year average. 

Long Term:

  • Henry Hub spot price expected to increase to $3.10/MMBtu in 2018
  • DOE approves first U.S floating LNG export facility expected to come on line in 2021 or 2022 
  • Sabine Pass Train 4 LNG expansion terminal announces major completion milestone and commercial operations date of March 2018. 
Conclusion:
  • Based on current electricity pricing which continue to hold at 4-5 year lows, our recommendation would be to secure long term contracts, and even secure long term contracts with starts as far out as 2020. 
  • Based on current natural gas pricing which has held strong over the last 12 months and with significant increases in natural gas exports and generation, now would be the time to consider locking in long term gas contracts even with starts as far out as 2019/2020. 

Robert B. Hayward, Jr.,  President and CEO

“Nelson Hoover has provided outstanding care for Quarryville for over seventeen years. We have been well served by his patient, caring, graciously persistent wisdom with utilities.”

Philippians 4:13

Robert B. Hayward, Jr., President and CEO

SIGN UP FOR OUR NEWSLETTER.
The Energy Markets…simplified.

signuptoday

Call Us Today for a No-Obligation Conversation: Kit Gutteridge, President, AEP 484.406.5400 x101