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September 28th, 2016:

Natural Gas Prices Rise on Strong Demand

American Energy Coalition - September 28th, 2016

Strong demand has driven natural gas prices to their highest point in 20 months, and traders are finding encouragement to bet on higher prices ahead, according to a recent Wall Street Journal article.

“Historic heat has caused record demand for gas-fired power at a time of declining supply growth, persuading many to bet that the [natural gas] glut will ease and lift prices just ahead of the high-demand winter-heating season,” The Journal wrote. “That could cause prices to keep shooting higher if winter produces strong demand.”

Commodity Weather Group LLC in Bethesda, Md., this week updated a cold winter outlook with even colder temperatures, the article states. “Nearly the entire eastern half of the country is likely to get temperatures averaging 2 to 3-degrees-Fahrenheit-below normal in November, it said. Extreme cold is likely to linger in some parts of the North through March, pushing the need for heat up 8.2 percent over the 10-year average, by the metric of heating-degree days.”

“The United States must grow supplies from a virtual standstill at the present time and begin a sharp acceleration by the early 2017 at the latest, if it is to avoid major shortfalls in storage by the end of March,” FirstEnergy Capital Corp. in Calgary, said in a note to clients quoted by The Journal. “It expects prices to rise steadily from mid-October.”

The power grid also is becoming more reliant on natural gas as coal-fired power plants close. Power-sector demand is up 10 percent from a year ago when factoring out the hotter weather, The Journal write, citing data from S&P Global Platts Analytics. Industrial demand also has increased from a year ago for six straight months, according to the U.S. Energy Information Administration.

To read the Wall Street Journal article, click here.

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