uploads///elec consumption

Increase Expected: Electricity Consumption and Natural Gas Flows


May. 5 2015, Updated 9:57 a.m. ET

Electric power plants

Gas flows to electric power plants increased by 2.3% to 20.3 Bcf (billion cubic feet)—compared to the previous day. The gas flows to electric power plants have been 14% more than the levels last year. Gas deliveries to the residential and commercial segment also increased from the previous day.

The warm weather is higher than normal. It’s driving the cooling demand. As a result, electrical consumption is increasing. It’s expected to increase more in the near term. The demand for natural gas from gas powered electric plants is expected to increase. Similarly, lower natural gas prices are causing coal plants to switch to natural gas power plants. This will also increase the demand for natural gas.

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US stockpile report

Last week, the EIA (U.S. Energy Information Administration) published the weekly natural gas storage report on April 30, 2015. The weekly natural gas in storage increased by 81 Bcf to 1,710 Bcf from 1,629 Bcf. The next natural gas storage report will be released on Thursday, May 7, 2015.

The market estimates an increase in gas inventories by 70 Bcf for the week ending May 1. The current stockpiles are more than 80% above the level of 969 Bcf last year. However, the five-year average for natural gas inventories is at 1,785 Bcf. The better-than-expected inventories will put pressure on natural gas prices.

The Energy Select Sector SPDR ETF (XLE) and the Spider Oil and Gas ETF (XOP) diverged from natural gas’ price movement yesterday. They fell by 0.25% and 1.17% at the close of trade. Energy companies like Stone Energy (SGY), Memorial Resource (MRD), and SM Energy (SM) are positively impacted by the increase in natural gas prices. These companies have a natural gas production mix that’s greater than 46% of their production portfolio. They account for 4.18% of XOP.


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