uploads///summer cooling days

Power Plants’ Demand Soars: Natural Gas Is above $2.50 per MMBtu

By

Apr. 30 2015, Published 9:34 a.m. ET

Short-term demand spike

The demand from power plants soared this week. Gas flows to industrial plants increased to 23.3 Bcf (billion cubic feet). Similarly, consumption from electric power plants rose to 22.8 Bcf. Switching coal power plants to natural gas power plants will also drive the demand for natural gas prices. Lower natural gas prices are the driving force behind switching the power plants.

Gas deliveries to power plants may increase more due to warmer weather estimates. This will drive the cooling demand during the hot summer.

Article continues below advertisement

EIA gas stockpile report

On April 30, 2015, the EIA (U.S. Energy Information Administration) will publish the weekly gas in storage report at 10:30 AM. The market estimates an increase of 86 Bcf. Last week, natural gas in storage increased to 1,629 Bcf from 1,539 Bcf for the week ending April 17. This was the highest inventory increase since November 2014. The current stockpiles are 83% greater than the levels last year. The oversupply of natural gas supplies continues to put pressure on gas prices. However, improving demand should support gas prices.

Natural gas volatility impacts the returns of ETFs like the Spider Oil and Gas ETF (XOP) and the Energy Select Sector SPDR ETF (XLE). Companies like Magnum Hunters Resources (MHR), Gulfport Energy (GPOR), and SM Energy (SM) are also affected by natural gas prices. These companies have a natural gas production mix that’s greater than 46% of their production portfolio. They account for 3.76% of XOP.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.