RD Energy Newsletter: July 2018

July 2018 Energy Update
Key Drivers

  1. June started the cooling season the 2nd hottest the nation has seen since 1950
  2. NG storage levels trailing both one year ago and 5 year levels.  Shortfall may exist into winter
  3. Looking at historical storage level fundamentals based on the current deficit NG prices could be around $3.75 /MMBTU- $4.00/MMBTU.  Strong natural gas production has helped keep prices down
  4. Beginning next winter with a storage deficit is very bullish on winter prices
  5. Use of natural gas in power generation is up 14% over a year ago and could increase if hot weather continues and NG prices stay lower than the price equivalent of coal
  6. LNG exports are up 62% from a year ago and can grow another 4X in the next two years

 

Commentary

Natural gas production peaked in early May and stalled.  Natural gas storage is running at a deficit and may not get completely filled by next winter.  Natural gas use in the making of electric is running above levels a year ago and could increase further if A. the weather stays hot and B. the cost equivalent for coal stays higher priced.  U.S. LNG exports is up 62% from a year ago and will soon have the capacity to grow another 4X above current levels over the next two years.  This has been the second hottest June since 1950 in the U.S.   The Midwest is looking for the next two weeks to be above normal or much above normal.  All of this adds up to a lot of bullish signals.  The only bearish signal that might happen is a cooler than normal August.  A lot of our clients have been proactive and have fixed electric and natural gas rates 2-4 years into the future.  Others are cautiously waiting for a price dip that may or may not occur or are just too busy right now.  Please feel free to contact us to discuss your electric and natural gas price options for the next 1-4 years.


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