Nov 1, 2021 11:03:40 AM

The EIA anticipates in 2022 that crude will exceed pre-pandemic levels at 99.6 million barrels a day. The International Energy Agency increased its global oil-demand forecasts for this year and the next by 170,000 and 210,000 barrels a day. They also reported that,  “An acute shortage of natural gas, [liquefied natural gas] and coal supplies stemming from the gathering global economic recovery has sparked a precipitous run-up in prices for energy supplies and is triggering a massive switch to oil products and direct crude use for power generation,” as well as  adding that power-generation plants, fertilizer producers, manufacturing operations and refineries are all affected. Bjarne Schieldrop, chief commodities analyst at SEB Markets states, “We have never had a situation like  where oil is extremely cheap [versus gas] so we just don’t have empirical evidence” for how much oil demand may increase. Additional factors such as weak natural-gas inventories for the time of year and low wind levels in Europe have coincided with the post-pandemic economic recovery, coal shortages in China and the possibility of a cold Northern Hemisphere winter to send fossil-fuel prices soaring. IEA Executive Director Fatih Birol said extreme weather events such as Hurricane Ida in the Gulf of Mexico, droughts stymieing hydroelectric power in China and Brazil, and widespread flooding have also contributed to the energy crunch. Birol also added that supply choke points, including pandemic-delayed maintenance work, meant that natural-gas outages are currently 40% higher than average.

General Motors Co. (GM), in partnership with PJM member TimberRock, announced plans last week to utilize the PJM marginal emission rates data to help GM reach 100% renewable energy to power its operations by 2025 – five-years earlier than previously announced. GM Chief Sustainability Officer Kristen Siemen said, “We know climate action is a priority and every company must push itself to decarbonize further and faster. That’s what we are doing by aiming to achieve 100 percent renewable energy five years earlier in the U.S. as we continue to advance on our commitment to lead an all-electric, carbon-neutral future.” The marginal emission rate data stream is publicly available on PJM’s Data Miner tool. The development of this data source was the work of PJM alone, not under any special relationship with GM or TimberRock.

The EIA forecasted that U.S. households will use 30% more natural gas for space heating and will spend an average of $746 on heating this winter (October–March), which is $172, or more than last year. Residential spending on winter natural gas bills is largely determined by the retail price of natural gas and the amount of natural gas consumed. According to the U.S. Census Bureau’s 2019, Natural gas is the primary heating fuel for 48% of U.S. homes. Retail price of natural gas and the amount of natural gas determines residential spending on winter natural gas bills. Higher prices this winter can be attributed to the increase in natural gas prices over the past year, utilities having to raise prices for consumers due to the winter storm in February 2021 which affected most of the country, but particularly Texas and the Midwest. The cold snap forced many utilities to purchase natural gas at spot prices that were higher than anticipated. Utilities were not able to collect enough to cover the cost of the natural gas since retail rates were already set for the respective months which caused a chain of events where many utilities raised prices in subsequent months to make up for the under collection.

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General Market Update

  • The December 2021 NYMEX Henry Hub traded to $6.198/MMBtu, up $0.75 (+13.8%) from the previous Wednesday. The price of the 12-month strip averaging December 2021 through November 2022 futures contract was up $0.39 (+8.8%) to $4.825/MMBtu.
  • Boston’s Algonquin Citygate price went up $1.13 (+25.0%) to $5.65/MMBtu last Wednesday. Transco Zone 6 NYC price increased $1.29 (+31.1%) to $5.44/MMBtu. 
  • Pennsylvania’s Eastern Gas South rose $1.17 (+28.4%) to $5.29/MMBtu. Tennessee Zone 4 Marcellus spot price increased $1.10 (+26.1%) to $5.31/MMBtu.
  • SoCal Citygate price increased $0.88 (+14.6%) to $6.90/MMBtu last Wednesday. The price at Northern California PG&E Citygate rose $0.67 (+9.9%) to $7.43/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 $0.07126/kWh is likely for the 3 month period and headroom of negative $0.06869/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 is now present in the shorter periods for contract with 3 and 6 month term.  Negative headroom of $0.01433/kWh is likely for the 3 month period and negative headroom of $0.01003/kWh is likely for the 6 month period; respectively.

 

Storage

  • For the week ending October 22nd, 2021, the EIA reported net injections into storage of 87 Bcf, which is more than last year’s net injection of 32 Bcf this week last year and more than the 5-year (2016-2020) average net injections of 62 Bcf.
  • Working natural gas in storage totaled 3,548 Bcf, which is 403 Bcf (-10.2%) lower than last year’s working gas totals of 3,951 Bcf at the same time and 126 Bcf (-3.4%) lower than the 5-year average of 3,674 Bcf.  Total working gas is within the five-year historical range.

 

Supply/Demand

  • Average total supply of natural gas rose 1.4% week/week.  Dry natural gas production increased by 1.5%, while net imports with Canada increased by 1.1% compared with the previous week. 
  • Total US consumption of natural gas rose by 4.8% since last week.  Natural gas consumption for power generation increased 2.0%, industrial sector consumption increased 1.0%, residential-commercial consumption increased 24.3% week over week, and exports to Mexico decreased 0.6% compared to last week.
  • US LNG exports were unchanged week over week, with 20 vessels departing US ports for a combined 73 Bcf.

Weather

  • A colder weather pattern for the Eastern United States is forecast to begin in November for the 8-14 day outlook starting November 5th.  The start of November 2021 brings a below normal weather pattern for the Eastern United States that is East of the Mississippi River.  The Rocky Mountain States and Southwestern States are forecast for above normal temperatures. 
  • The Pacific Coast States are forecast for normal temperatures.  Kentucky and Tennessee have the highest probability for much below normal temperatures. 
  • In the 8-14 day window from November 5th through November 11th, the Pacific Coast States, Rocky Mountain States, Southwestern States, Southern States and South Florida are forecast for above normal precipitation. 
  • The Great Lakes States and New Mexico are forecast for below normal precipitation.  There are some bands of normal precipitation probability forecast across the United States, including South Texas and the Dakotas.

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