Winter Winding Down: Storage Inventories Recovering & LNG Export Capacity to Double in 2019
During the February Energy Market Intel Webinar, Constellation’s Commodities Management Group (CMG) provided an in-progress recap of winter 2018-2019, reflected on the impact of natural gas production and storage on energy prices, and shared an outlook for increased liquefied natural gas (LNG) exports in 2019 and onward.
The winter heating season is winding down and severe below-normal winter temperatures have largely been confined to the Great Lakes and Upper Midwest regions. After a hard kick-start to winter’s beginning in early November with record-low temperatures across much of the country, December featured a decisive warm-up that lasted through the first half of January. The second half of January and month of February featured short bursts of cold air followed by several days of well-above normal temperatures, except in the Upper Midwest and Great Lakes. However, the big picture for winter 2018-2019 – relative to natural gas and power markets – is that temperatures were not cold enough, for long enough, where enough people and industrial load reside, to rally NYMEX pricing.
Natural Gas Storage
The natural gas storage deficit was the primary market driver in October and November of 2018, starting the withdrawal season at a 15-year low. Through the winter, with above-average temperatures persistent in many key markets, the storage deficit continued to be less and less of a concern as much of the year-over-year deficit was clawed back. This noted, storage inventories are more than 300 Bcf lower than the five-year average and should be supportive of the current pricing action going into the second quarter.
Production of natural gas begins the year at near all-time highs (85 Bcf per day), and the Energy Information Administration forecasts 2019 production to average 90 Bcf per day. Rising production is the key feature that kept natural gas and power markets in check this winter in the absence of sustained below normal cold air in many key markets.
Liquefied Natural Gas Exports
The team examined the confluence of several new liquefied natural gas (LNG) export terminals that are scheduled to come online in 2019, whereby U.S. LNG export capacity will double in ten months. The doubling of U.S. LNG export capacity this year marks a pivotal shift in domestic natural gas and electricity markets as the gas market is increasingly moving into the orbit of a global commodity with numerous outside influences on supply, demand and price presenting themselves for the first time.
Join us in April for our next Energy Market Intel Webinar on April 17, 2019, at 2:00 p.m. ET as we discuss the end of winter and take a look at the latest production forecasts, pricing action and market drivers effecting the second quarter and beyond.