Natural Gas Prices Supported by Nuclear Outages and Smaller Storage Injection

Price support for physical prices, particularly in the western half of the U.S. may be due to outages at several nuclear plants. There are currently a number of nuclear plants down for maintenance and refueling and this means electricity normally generated by those locations is coming from natural gas-fired electric generation facilities. This increased demand for natural gas and provides support for physical natural gas prices. Another factor providing price support are weather forecasts for the upcoming winter.  Some meteorologists are calling for the coldest winter in more than a decad, which would draw down storage quicker than normal.  These forecasts are premised on neutral or weaker El Niño conditions.   Should El Niño strengthen once into winter, the forecasts would likely shift from below normal to normal to even above normal temperatures.   

“However, even if temperatures are below normal, there should be sufficient gas supplies in storage inventories to meet demand,” says Valerie Wood, President of Energy Solutions, Inc.  “Today’s storage injection report is expected to take inventories from the current 3,716 Bcf level to around 3,741 Bcf.  By comparison, the most that has ever been in storage at the end of the season on October 31 is 3,545 Bcf.  How the market views this week's report is difficult to say.  It really shouldn't matter that much because inventory levels are already very high.  However, by comparison, this week's report is only expected to be between 25-30 Bcf because of the colder weather last week, and last year's report for the same week was 71 Bcf.”   

Right now, the market is somewhat directionless.  According to Wood, this is the seasonal fourth quarter rally and periodic pullbacks are just that -- temporary.  “It is important for buyers to remember that under seasonal fourth quarter rallies, the high is typically hit by the end of October or mid-November, but sometimes the rally can carry into December,” says Wood.  “Buyers need to be patient right now, but they shouldn’t go to sleep.  We expect a major buying opportunity to surface with the first quarter decline, which sometimes occurs as early as mid-December.” 

Learn more about to prepare for this anticipated buying opportunity in the October edition of The Advisor, a publication of Energy Solutions, Inc. Request your complimentary copy by sending your request to request-oct-pr22@energysolutionsinc.com or call (608) 848-9589. 

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About Energy Solutions, Inc. 

Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 25 years of experience in the natural gas industry, our team focuses on natural gas prices and in helping businesses improve their internal processes for the purchase of natural gas.