Market Newsletter – August 2017August 01, 2017
August was a month largely dominated by extreme weather patterns – early on, we saw a week straight of sub-$3 Henry Hub settles on the 12-month strip as a result of cooler than average temperatures throughout much of the Midwest and Northeast. Cal 18 through Cal 20 settled under $3 for almost the entirety of the month, an indication of high confidence in much of the backlogged natural gas pipeline applications that FERC is currently reviewing (totalling 45 Bcf/d of capacity). Ten of the projects under consideration account for 65% of the total proposed capacity. Another five large pipeline projects support increased takeaway for natural gas production from the Marcellus and Utica shale plays.
Hurricane Harvey was the real story of August, generating a swirl of uncertainty in the industry regarding production, accessibility, and infrastructure overall. This was reflected in short-lived price spikes towards the end of the month that were tempered by better than expected storage injections coupled with downward pressure related to the diminished demand. Additionally, LNG exports out of Sabine Pass Terminal were completely halted, which led to even greater downward pressure on NG prices. Before Harvey hit the Texas coast, Sabine Pass was on track to deliver a monthly record amount of gas. Storage facilities are currently nearing full capacity as deliveries have fallen to only 15% utilization. Much of the retail power markets and its participants were disrupted operationally due to displaced personnel – Houston is a strong city with a solid citizenry and a bright future, and we at Transparent Energy continue to hope for a speedy recovery in the wake of massive flooding and devastation.
Hurricane Irma’s exact effects are largely unknown at this moment, but given that it is the strongest Category 5 storm
(downgraded to Cat 3) to ever approach the U.S., the outlook is bleak for the southeast. With much of the population and corresponding demand evacuating, we once again expect a significant decrease in demand which should continue to place downward pressure on natural gas and electricity prices, provided there are no major disruptions to pipeline infrastructure. With all the displaced demand and cooler than normal temperatures throughout most of the country (West is the exception), the Edison Electric Institute reported that six of the nine EEI regions saw year over year decreases in electric output. Overall, we are anticipating a very neutral September with limited price upside stretching into October.