Viewpoint: Low demand weighs on midcon winter gas
Winter natural gas forward prices at key US midcontinent hubs are trading at a discount to the Henry Hub as new pipelines and high inventories following low demand in the first-half of 2017 have eased supply concerns.
The Chicago Citygates winter strip that includes prices from November 2017 through March 2018 is averaging a 4¢/mmBtu discount to the Henry Hub futures contract. The winter strip at Mich Con Citygates is averaging an 8¢/mmBtu discount, according to Argus forward curves.
Chicago and Mich Con were near parity with the Henry Hub in the spot market last winter, narrowing from 7¢/mmBtu and 8¢/mmBtu premiums in the winter of 2015-16, respectively.
The basis in those markets shifted to discounts for this winter as regional inventories stayed above the five-year average this year following low weather-related demand. Expectations are also high that new pipeline capacity will allow more low cost gas to reach the midcontinent market, despite a likely increase in demand.
Demand for gas in the midcontinent in the first half of 2017 averaged 12 Bcf/d (340mn m³/d), down by 4pc from the year-earlier period primarily on lower power sector demand because of higher prices, according to BTU Analytics. The prompt-month Nymex futures contract in the first half of the year averaged at $3.10/mmBtu, up by 46pc from a year earlier.
Power generation from natural gas in the midwest census region in the first half of 2017 should average 281GWh/d, down by 20pc from a year earlier, according to the US Energy Information Administration (EIA).
The mild winter earlier this year also curbed gas demand for heating, resulting in smaller-than-average storage withdrawals. Midwest stocks in the week ended 14 July reached 733 Bcf, 7.6pc above the five-year average, according to the EIA.
Gas-fired generation in the second half of 2017 should increase to 365GWh/d, 1pc higher than the year earlier and 30pc more than the first half, according to the EIA's Short-Term Energy Outlook. Heating demand should also increase this winter compared to the previous winter on expectations for more normal weather.
Improvements in pipeline takeaway capacity is also expected to help put downward pressure on midcon prices this winter.
Energy Transfer's Rover pipeline is expected to be able to move up to 3.25 Bcf/d of gas from western Ohio to Michigan for eventual delivery to Union Gas' Dawn trading hub in Ontario, Canada before this winter. Rover has faced some construction delays for Phase 1, which was supposed to come online in July, but the pipeline developer does not anticipate any delays to the projected 1 November full in-service date.
New agreements on TransCanada's Mainline that lower tolls is also expected to bring up to 1.4 Bcf/d additional gas to the Dawn hub starting 1 November. Some of that gas could also reach US midcontinent and northeast markets.
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Chevron’s oily DJ basin buy boosts gas output
Chevron’s oily DJ basin buy boosts gas output
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US job growth nearly halved in April: Update
US job growth nearly halved in April: Update
Adds services PMI in first, fifth paragraphs, factory PMI reference in sixth paragraph. Houston, 3 May (Argus) — The US added fewer jobs in April as the unemployment rate ticked up and average earnings growth slowed, signs of gradually weakening labor market conditions. A separate survey showed the services sector contracted last month. The US added 175,000 jobs in April, the Labor Department reported today, fewer than the 238,000 analysts anticipated. That compared with an upwardly revised 315,000 jobs in March and a downwardly revised 236,000 jobs in February. The unemployment rate ticked up to 3.9pc from 3.8pc. The unemployment rate has ranged from 3.7-3.9pc since August 2023, near the five-decade low of 3.4pc. The latest employment report comes after the Federal Reserve on Wednesday held its target lending rate unchanged for a sixth time and signaled it would be slower in cutting rates from two-decade highs as the labor market has remained "strong" and inflation, even while easing, is "still too high". US stocks opened more than 1pc higher today after the jobs report and the yield on the 10-year Treasury note fell to 4.47pc. Futures markets showed odds of a September rate cut rose by about 10 percentage points to about 70pc after the report. Services weakness Another report today showed the biggest segment of the economy contracted last month. The Institute for Supply Management's (ISM) services purchasing managers index (PMI) fell to 49.4 in April from 51.4 in March, ending 15 months of expansion. The services PMI employment index fell to 45.9, the fourth contraction in five months, in today's report. Readings below 50 signal contraction. On 1 May, ISM reported that the manufacturing PMI fell to 49.2 in April, after one month of growth following 16 months of contraction. In today's employment report from the Labor Department, average hourly earnings grew by 3.9pc over the 12 month period, down from 4.1pc in the period ended in March. Job gains in the 12 months through March averaged 242,000. Gains, including revisions, averaged 276,000 in the prior three-month period. Job gains occurred in health care, social services and transportation and warehousing. Health care added 56,000 jobs, in line with the gains over the prior 12 months. Transportation and warehousing added 22,000, also near the 12-month average. Retail trade added 20,000. Construction added 9,000 following 40,000 in March. Government added 8,000, slowing from an average of 55,000 in the prior 12 months. Manufacturing added 9,000 jobs after posting 4,000 jobs the prior month. Mining and logging lost 3,000 jobs. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Austrian regulator consults on gas tariff changes
Austrian regulator consults on gas tariff changes
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US job growth nearly halved in April
US job growth nearly halved in April
Houston, 3 May (Argus) — The US added fewer jobs in April as the unemployment rate ticked up and average earnings growth fell, signs of gradually weakening labor market conditions. The US added 175,000 jobs in April, the Labor Department reported today, fewer than the 238,000 analysts anticipated. That compared with an upwardly revised 315,000 jobs in March and a downwardly revised 236,000 jobs in February. The unemployment rate ticked up to 3.9pc from 3.8pc. The unemployment rate has ranged from 3.7-3.9pc since August 2023, near the five-decade low of 3.4pc. The latest employment report comes after the Federal Reserve on Wednesday held its target lending rate unchanged for a sixth time and signaled it would be slower in cutting rates from two-decade highs as the labor market has remained "strong" and inflation, even while easing, is "still too high". US stocks opened more than 1pc higher today after the jobs report and the yield on the 10-year Treasury note fell to 4.47pc. Futures markets showed odds of a September rate cut rose by about 10 percentage points to about 70pc after the report. Average hourly earnings grew by 3.9pc over the 12 month period, down from 4.1pc in the period ended in March. Job gains in the 12 months through March averaged 242,000. Gains, including revisions, averaged 276,000 in the prior three-month period. Job gains occurred in health care, social services and transportation and warehousing. Health care added 56,000 jobs, in line with the gains over the prior 12 months. Transportation and warehousing added 22,000, also near the 12-month average. Retail trade added 20,000. Construction added 9,000 following 40,000 in March. Government added 8,000, slowing from an average of 55,000 in the prior 12 months. Manufacturing added 9,000 jobs after posting 4,000 jobs the prior month. Mining and logging lost 3,000 jobs. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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