Weekly Recap: Natural Gas Prices See Big Gains
Natural gas prices rose on market speculation that low prices have caused electricity generators to switch from coal to natural gas.
Total natural gas supplies were flat last week compared to the previous week. Yet supplies were still 8.8% greater than in the corresponding week last year.
The U.S. Energy Information Administration’s “Short-Term Energy Outlook” forecasts that total natural gas consumption will average 76.3 Bcf per day in 2015 and 75.8 Bcf per day in 2016.
After the 63 Bcf build last week, natural gas inventories as of April 10 were ~82 % higher than last year’s levels. Still, they’re ~9% lower than the five-year average.
For the week ending April 3, natural gas inventory came in at 1,476 Bcf (billion cubic feet) compared with 1,461 Bcf a week earlier.
Gasoline demand increased from ~8.61 MMbpd to ~8.91 MMbpd last week. Gasoline inventories remain outside the five-year range despite the draw in inventories reported on Wednesday.
Distillate demand drives crude demand and crude prices. So, energy investors watch distillate inventories closely.
US crude oil refinery inputs averaged 16.2 Mmbpd during the week ended April 10. This represents an increase of 283,000 bpd over the previous week’s average.
If inventories at Cushing reach capacity, oil prices could tumble further. That would hurt oil producing companies such as Hess (HES), ExxonMobil (XOM), Chevron (CVX), and Apache (APA).
The EIA announced an increase of 1.3 million barrels last week. This brought US commercial crude oil inventories to 483.7 million barrels—the highest amount in almost 80 years.
Increasing production and rising inventories will continue to put pressure on natural gas prices. Prices could test the support of $2.50 per MMBtu.
May natural gas futures rose by 2.84% and settled at $2.68 per MMBtu on April 16. The EIA released the weekly natural gas in storage report on the same day.
During the week ending April 3, US coal shipments dropped to 17.41 million tons. That’s down from 18.27 million tons during the week ending March 20.
The Appalachian region is located in the Eastern US. Northern Appalachian coal prices remained stable at $61.20 a ton.
Walter Energy (WLT) lost over 10% to end the week at 62 cents, and Alpha Natural Resources lost 1% to end the week at $1. Walter Energy is a pure-play met coal producer.
Less electricity generation in the East hampers eastern coal producers (KOL) such as Alliance Resource Partners (ARLP), while less in the West hampers PRB producers such as Cloud Peak Energy (CLD).
Albuquerque, New Mexico–based PNM Resources (PNM), one of the previous week’s biggest gainers, was the biggest loser in the week ending April 10.
AES (AES) was the biggest power utility gainer in the week ending April 10. The stock gained 13.2% to end the week at $13.20 with a market capitalization of $9.3 billion.
Over 90% of the coal produced in the US is used for electricity production. The utility sector is coal’s largest end user.
The EIA expects oil and gas production to decrease at three key shales and increase at three others. It expects production to stay the same at Marcellus.
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