Oct 20, 2021 1:08:58 PM

The price of U.S. natural-gas futures have been going up when it is supposed to be offseason for demand. Energy has been the best performing sector in the S&P 500 stock index in September. According to Baker Hughes Co, we saw $5 prices in 2014, but there were more than three times as many rigs drilling gas wells as the 100 operating now. There are several reasons for the high prices, such as February’s freeze in Texas, hottest on record and drought out West dried up hydropower production in  June and July, which lead to higher demand for power for air conditioners. Hurricane Ida forced the majority of the  Gulf of Mexico’s gas output offline and more than a third of the Gulf’s gas production remained shut, according to the Bureau of Safety and Environmental Enforcement. Europe also suffered high prices due to hot weather, lackluster wind-power generation and lower imports from Russia. According to Goldman Sachs Group Inc. analyst Samantha Dart, Europe's high prices will force U.S. prices to climb to $17 with no corresponding rise overseas before it becomes uneconomic to ship liquefied shale gas across the Atlantic. Christopher Louney, an analyst with RBC Capital Markets said, challenges in forecasting how high prices could rise lies in the unprecedented ties between the once isolated U.S. market and international prices and higher overseas prices are lifting those in the US.

PJM has received 80 proposals that address onshore and offshore needs that would facilitate New Jersey’s goal of delivering 7,500 MW of offshore wind generation by 2035. PJM’s Regional Transmission Expansion Plan (RTEP) projects are driven by reliability or market-efficiency criteria. The proposals fall into four categories:

  • Option 1a: onshore upgrades on existing facilities (45 proposals)
  • Option 1b: onshore new transmission connection facilities (22 proposals)
  • Option 2: offshore new transmission connection facilities (26 proposals)
  • Option 3: offshore network (eight proposals)

“These are just the combinations as supplied by the entities,” Berner said. There may be an opportunity as well for PJM, in concert with the New Jersey Board of Public Utilities (NJBPU), to look at various proposals and determine that some of them might be paired up differently.” According to a guidance document issued by the NJBPU, it is targeting the second half of 2022 for that decision.

According to recent data from the Cambridge Bitcoin Electricity Consumption Index, the United States is now home to over 35% of the world's Bitcoin mining. Countries like China have cracked down Bitcoin mining due to their already large carbon footprint, which used to be the larges bitcoin miner in the world. States like New York, Kentucky, Georgia and Texas are popular for Bitcoin mining.  The growth of Bitcoin mining has companies such as Marathon Digital to purchase a struggling coal-fired power plant. Consumers are worried about blackouts due to the mining in their state, especially with droughts causing more fuel shortages, crisis in Texas and Europe driving prices and supply, but the Bitcoin miners states that it is unlikely. However, reopening coal fired plants is concerning for states with aggressive clean energy initiatives such as New York, which reportedly hosts the highest percentage of Bitcoin miners. 

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General Market Update

  • The November 2021 NYMEX Henry Hub traded to $5.590/MMBtu, down $0.09 (-1.5%) from the previous Wednesday. The price of the 12-month strip averaging November 2021 through October 2022 futures contract was up $0.06 (+1.3%) to $4.724/MMBtu.

  • Boston’s Algonquin Citygate price went down $0.04 (-0.7%) to $5.30/MMBtu last Wednesday. Transco Zone 6 NYC price decreased $0.36 (-6.9%) to $4.85/MMBtu. 

  • Pennsylvania’s Eastern Gas South fell $0.34 (-6.7%) to $4.76/MMBtu. Tennessee Zone 4 Marcellus spot price decreased $0.39 (-7.7%) to $4.67/MMBtu.

  • SoCal Citygate price decreased $0.59 (-9.0%) to $6.00/MMBtu last Wednesday. The price at Northern California PG&E Citygate fell $0.36 (-5.0%) to $6.86/MMBtu week over week.

 

Utility Highlight

  • The upcoming Price to Compare for First Energy Potomac Edison in Maryland, Residential No Electric Heat rate class (RSNH) is $0.06453/kWh, in effect from November 1, 2021 to November 30, 2021.

  • Negative Headroom in the POTED – RSNH territory is now present in the shorter periods for contract with 3 and 6 month term.  Headroom of negative $0.07237/kWh is likely for the 3 month period and headroom of negative $0.06925/kWh is likely for the 6 month period; respectively.

 

  •  The current Price to Compare data for First Energy Potomac Edison in Maryland (POTED), General Service Commercial Small (GSCS) is $0.10958/kWh, in effect from November 1, 2021 to November 30, 2021.

  • Negative Headroom in the POTED – GSCS market for the shorter periods for contract with 3 and 6 month term.  Negative headroom of $0.01565/kWh is likely for the 3 month period and negative headroom of $0.01061/kWh is likely for the 6 month period; respectively.

 

Storage

  • For the week ending October 8th, 2021, the EIA reported net injections into storage of 81 Bcf, which is more than last year’s net injection of 50 Bcf this week last year and more than the 5-year (2016-2020) average net injections of 79 Bcf.

  • Working natural gas in storage totaled 3,369 Bcf, which is 501 Bcf (-12.9%) lower than last year’s working gas totals of 3,870 Bcf at the same time and 174 Bcf (-4.9%) lower than the 5-year average of 3,543 Bcf.  Total working gas is within the five-year historical range. 

 

Supply/Demand

  • Average total supply of natural gas rose 0.2% week/week.  Dry natural gas production decreased by 0.4%, while net imports with Canada decreased by 4.6% compared with the previous week. 

  • Total US consumption of natural gas rose by 1.3% since last week.  Natural gas consumption for power generation decreased 1.2%, industrial sector consumption was unchanged 0.0%, residential-commercial consumption increased 9.2% week over week, and exports to Mexico increased 1.5% compared to last week.

  • US LNG exports decreased week over week, with 16 vessels departing US ports for a combined 58 Bcf.

 

Weather

  • An above normal weather pattern for most of the Western and Northern United States, is forecast to wrap up October in the 8-14 day outlook starting October 22nd.  The end of October 2021 brings an above normal weather pattern for the Midwestern States, Rocky Mountains States, Southwestern States, Northern Pacific Coast States, Middle Atlantic States, New England States and South Florida which are forecast for above normal temperatures. 

  • Coastal Southern California is forecast for below normal temperatures.  The Southern States are forecast for normal temperatures.  The Rocky Mountain States have the highest probability for much above normal temperatures.

  • In the 8-14 day window from October 22nd through October 28th, the Pacific Coast States, Rocky Mountain States, Southwestern States and South Florida are forecast for above normal precipitation. 

  • The Midwestern States, Southern States, Middle Atlantic States and New England States are forecast for below normal precipitation.  There are a few sporadic bands of normal precipitation probability forecast across the United States, including South Texas.


 

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