August 2019 Energy Update
Key Drivers
- Ever stronger natural gas production
- Flat natural gas demand
- Strong storage levels in the U.S. & Europe
Commentary
From May 2019 to the end of July 2019 natural gas prices have dropped nearly $.50/MMBTU. Even in July, when the heatwave broke records over much of the country and natural gas consumed in the creation of electric hit an all-time high, natural gas prices still didn’t rise much. As soon as the heatwave ended the Key Drivers came back as the primary fundamental indicators and prices fell. Natural gas prices are now trading at the lowest level since July 2016.
It appears at least for now that natural gas production in 2019 is winning the battle over natural gas demand. Natural gas production keeps creeping up while overall natural gas consumption is flat, at best. It seems that natural gas prices for the month of August will trade in a tight range. Something major domestically or globally will have to happen to change this fundamental supply/demand imbalance. Right now September and October are looming large as the months when AC demand drops substantially and heating demand hasn’t begun. Natural gas storage levels in the U.S. are higher than a year ago. Natural gas storage levels in Europe is well above normal due to a mild 2018/2019 winter. This high storage in Europe could slow LNG exports from the U.S. in a very big way. If winter doesn’t come early or as mentioned earlier some major event domestically or globally doesn’t change the supply/demand fundamentals, then this Fall could see the lowest natural gas prices since March 2016 when NYMEX traded at $1.71/MMBTU.