April 2019 Energy Update
Key Drivers 
- The United States natural gas storage deficit at the end winter 2019
- Unlike 2018 will the natural gas storage deficit quickly disappear this spring?
- Spring’s natural gas production surplus over natural gas spring demand
- When will higher natural gas demand show up to lower the production surplus?
Commentary
At first glance the natural gas storage deficit as we end the 2018/2019 winter appears very bullish for natural gas and electric prices. The end of the winter season storage level for 2018/2019 should be close to 1.1 TCF versus 1.4 TCF at the end of the 2017/2018 winter season. Even with record natural gas production all last summer the storage deficit wasn’t reduced until it dropped some in October. Starting this spring with an even bigger deficit the conditions look right for bullish price trends. However, there appears to be a major difference between this spring and last spring. Last March and April the Midwest and Northeast was much colder than normal. March 2019 wasn’t as cold as March 2018, but was still near historical normal temperatures. Early forecasts for April, however, show much above normal temperatures the last 3 weeks of the month. If the temperatures d
o stay above normal by this much, it’s possible that the year over year storage deficit could be quickly eliminated in April. This would definitely be bearish for natural gas prices and another buying opportunity to lock in short or long-term customer fixed rates like we saw last October. It’s important to remember that natural gas NYMEX is always more highly traded in the near trading months and less traded in the months beyond six months in the future. Therefore, long term fixed rates are less affected by near month volatility. As we like to point out to our electric customers it’s important to understand what is happening in the natural gas wholesale markets since natural gas is the key driver to electric wholesale prices. As natural gas has overtaken coal as the number one fuel for electric generation the link between the two commodities has become even stronger. We expect a warm spring may soften short-term natural gas and electric prices temporarily due to the production surplus versus weak spring natural gas demand. But, we will have to keep watch to see when and by how much demand goes up when the heat of summer arrives late May and June.