Winter 2010/2011: re-evaluation of natural gas prices for spring & summer 2011
WINTER WEATHER:
Heading degree days are the best measure of the severity of winter weather on a regional basis. Regional analysis is very important because demand in the residential/commercial market is concentrated in the Upper Midwest & Northeast. The Upper Midwest experienced about 4.7% more heating degree days during core months (Nov, Dec, Jan & Feb) of the winter of 2010/2011 and the Northeast experienced about 7.4% more heating degree days for the same core winter months.
RESIDENTIAL/COMMERCIAL DEMAND:
According to data published by EIA, residential/commerical demand in Nov averaged 25.1 BCFD and increased to 46.6 BCFD in Dec. PCC estimates demand averaged 47.5-48.0 BCFD in Jan and 45.5-46.5 BCFD in Feb -- based on heating degree days. Demand averaged 27.1 in Q4 2010 (10.5% higher than year-earlier volumes). PCC estimates demand averaged 42.1 BCFD (1% higher than year-earlier volumes) in Q1 2011. Based on total volume, demand during Q4 2010 and Q1 2011 was 270-275 billion cubic feet more than during Q4 2009 & Q1 2010. Based on the year-year increase in residential/commerrical demand alone, total withdrawals of natural gas from storage would likely be 0.20-0.25 TCF above average.
INDUSTRIAL/ELECTRIC POWER DEMAND:
Demand in the industrial sector is marginally seasonal & demand in the electric power sector is generally contra-seasonal. According to data published by EIA, industrial demand & electric power demand averaged 38.8 BCFD in Q42009 // Q!2010 and was 40.2 BCFD in Q42010 // Q1 2011. Total demand in winter 2010/2011 was 254 BCF higher than in the previous winter.
NATURAL GAS INVENTORY IN WORKING STORAGE:
According to EIA weekly survey data, Inventory in working storage reached a peak of 3.843 TCF in mid-November. During a typical winter, inventory withdrawals of 2 TCF supplement production and imports to meet peak winter demand. During the winter 2010/2011, demand was 0.53 TCF higher than during the previous winter heating season. The year-year increase in demand would normally be expected to total 2.5-2.55 TCF -- a significantly larger cumulative withdrawal of natural gas from working storage versus recent years. During this winter, however, withdrawals totaled 2.23 TCF. Furthermore, inventory in the producing region reached its seasonal low in mid-February and began to increase thereafter. PCC expects total injections to storage to be average or above average during April 1 through Nov 15 and forecasts inventory in working storage to increase to 3.80-3.85 TCF or equal to the record high volume of 2010. PCC also expects domestic natural gas production to continue to increase during 2011.
NATURAL GAS INVENTORY IN WORKING STORAGE:
Well head natural gas prices varied from a minimum of $3.64 per MMBtu to a maximum of $4.42 per MMBtu in Jan but prices declined to $4.23 in Feb. The min/max variance of $0.78 per MMBtu compares with a variance of $2.67 per MMBtu for the previous winter. Will natural gas prices decline during Apr/May/Jun? How will the hurricane season impact natural gas production in the Gulf of Mexico? How much will natural gas prices increase during Aug/Sep if the eastern Gulf of Mexico has tropical storms and hurricanes? PCC answers these and many other important questions in NGL Markets in North America,
