In its winter market assessment, the FERC staff sees moderate prices, adequate inventories, and growing production.
Weather, as always, will drive gas demand and price. The National Oceanic and Atmospheric Administration (NOAA) forecasts a normal winter over the large consuming region of the eastern US. The FERC staff expects residential and commercial gas demand to be comparable to last year’s levels, particularly in the Northeast.
“However, there is a high degree of uncertainty associated with this forecast since NOAA’s earlier expectation of an El Nino event this winter is on hold,” the staff report said. It added that chances are waning of an El Nino event strong enough to affect winter weather.
Average year-to-date gas prices derived from ICE futures data across the US are up 40-50% from last year but remain well below historic highs. The FERC staff doesn’t expect prices to increase much this winter, except for localized spikes in New England as temperatures fall.
The FERC staff expects current production and storage levels to be sufficient to meet winter heating demand load this winter in all regions.
“Total US natural gas supply, specifically natural gas production plus LNG and Canadian imports, is up less than 1% year-to-date, while natural gas in storage is down 4%,” the report said.
US gas production has increased 1.6% year-to-date, with growing shale gas production in the Northeast. Net US gas imports from Canada decreased 7% year-to-date, and US LNG imports dropped 40% due to abundant domestic production.
“US natural gas storage inventories are more than adequate for a normal winter despite a decline from last year’s record level,” the report said, attributing the storage rebuild to a relatively mild summer.
In New England, the report said, “Closer and cheaper Marcellus shale gas has largely displaced natural gas supplied to the Northeast via pipelines from the Southeast, the Midcontinent, and Canada.”
New England’s supplies from those areas have dropped from about 12 bcfd in 2008 to less than 6 bcfd in 2013, while Northeast production has increased from 2 bcfd to more than 11 bcfd, the report said.
LNG imports are likely to remain low this winter as gas prices fail to stay at elevated levels long enough to attract cargoes.
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