{"id":1123,"date":"2014-06-09T15:54:22","date_gmt":"2014-06-09T20:54:22","guid":{"rendered":"https:\/\/allenergyconsulting.com\/blog\/?p=1123"},"modified":"2014-06-09T15:54:22","modified_gmt":"2014-06-09T20:54:22","slug":"extreme-weather-impacts-to-gas-storage-and-price","status":"publish","type":"post","link":"https:\/\/allenergyconsulting.com\/blog\/2014\/06\/09\/extreme-weather-impacts-to-gas-storage-and-price\/","title":{"rendered":"Extreme Weather Impacts to Gas Storage and Price"},"content":{"rendered":"
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We have recently added a new feature in our gas model allowing users to upload their own forecast for the natural gas markets and to use the tool to produce your power sector demand. \u00a0This is very beneficial for those who shape and produce their own monthly forecast of natural gas fundamentals.<\/span><\/p>\n

In this analysis, we will look at extreme demand cases as a result of weather and the impact it will have on gas storage and price. First, we need to establish a baseline to target an inventory level. \u00a0For the baseline, production growth looks to be sustaining around 4%. \u00a0I suspect this will hold given the price incentive. \u00a0Net imports are up around 5% for the year and is projected to sustain. \u00a0In terms of growth outside the power sector, demand is up close to 10%, but this is largely due to the weather extremes in the early part of the year. \u00a0If you look at just May, which has more “normal” weather, demand is still up but only 7%. \u00a0For the base run I sustain the 7% growth in demand. \u00a0The baseline file was uploaded<\/a>, and using the controls we set the price to the current forward curve strip (06\/05\/14) and used the average weather between 2003-2013. \u00a0The below is the screenshot of the input setup.<\/span><\/p>\n

Baseline Storage Inputs\u00a0<\/span><\/p>\n

(Click Image to Enlarge)
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The results of the baseline is ending inventory in October around 3.5Tcf. \u00a0 This seems to be the market sentiment which puts the ending inventory 300 Bcf below the 5 year average. \u00a0 By the end of March the inventory is only 200 Bcf below the five year average. \u00a0A screenshot of the result is below.<\/span><\/p>\n

Baseline Storage Results<\/span><\/p>\n

(Click Image to Enlarge)
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In the high extreme demand case, only the demand components were changed. \u00a0Outside the power sector, weather changes are minimal compared to the winter swings. For the summer, a 3% demand increase was used. For winter, we did a weather analysis to produce a higher winter demand –\u00a0see uploaded CSV file<\/a>. \u00a0 For the power sector we changed the weather to the highest gas demand analog year. \u00a0This was presented in\u00a0our weather analysis<\/a>\u00a0we did for PMA subscribers a few months back. \u00a0In addition, to capture the high demand, we used a 0.7 factor on basis in summer and 1.3 basis in winter. \u00a0We then input the Henry Hub price at $5.5\/MMbtu. \u00a0 Below shows the input into the High Demand Case. \u00a0 \u00a0 \u00a0<\/span><\/div>\n
\u00a0High Demand Case Input<\/span><\/div>\n
(Click Image to Enlarge)<\/div>\n

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The results of high case show with the price response of $5.5\/MMbtu ending October inventory was able to end at 3.4Tcf ~400 Bcf below five year average. \u00a0 By end of March the difference between five year average widens slightly – see below.<\/span><\/p>\n

High Demand Case Results<\/span><\/p>\n

(Click Image to Enlarge)<\/span><\/p>\n

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For the low extreme demand case, similar to the high extreme demand, only the demand components are adjusted. \u00a0The change in demand outside the power sector from the baseline is narrow in the summer time. \u00a0A weather analysis was performed to produce the drop in the winter time. \u00a0 This can be seen in the\u00a0CSV file which was uploaded<\/a>. \u00a0 For the power sector control, similar to the high demand, we chose the extreme low analog gas demand year. \u00a0In addition we used a 1.3 factor for basis in summer and 0.7 factor in winter as indication of excess supply. \u00a0Henry Hub was lowered to $3.5\/MMbtu. \u00a0 The inputs are show below.<\/span><\/p>\n

Low Case Inputs<\/span><\/p>\n

(Click Image to Enlarge)<\/span><\/p>\n

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The result produces an ending inventory of 3.5 Tcf by the end of October, ~300Bcf below five year average. \u00a0By the end of winter, the inventory levels surpass the five year average. \u00a0In fact, there are months that actually set a new maximum inventory level. \u00a0 This likely indicates prices can potentially be lower than $3.50\/MMbtu in those months. \u00a0By the end of March, ending inventory is 2.1 Tcf which is 300 Bcf above five year average, but 400 Bcf below the five year maximum.\u00a0<\/span><\/p>\n

Low Case Results<\/span><\/p>\n

(Click Image to Enlarge)<\/span><\/p>\n

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In conclusion, one can create a fundamental plausible scenario where gas prices go as high as $5.5 \/MMbtu to as low as $3.5\/MMbtu with changing weather as the key variable. \u00a0Another study which can easily be done is creating a sensitivity on gas production. \u00a0 Given the current gas prices, we could see a surprise upside in gas production. \u00a0At some point there is an equilibrium between production, price, and storage. \u00a0 With this tool one can easily investigate various scenarios to formulate greater knowledge in the gas market.<\/span><\/p>\n


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Hopefully I have demonstrated the power \u00a0and ease of the tool to increase your knowledge.<\/span><\/p>\n


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Please contact me to schedule an online demo meetingdkb@allenergyconsulting.com<\/a>\u00a0or 614-356-0484<\/span><\/p>\n


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We are focused not only on supplying answers, but empowering you to find answers.<\/span><\/p>\n


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Your Inspired Energy Consultant,<\/span><\/p>\n

\u00a0<\/span><\/p>\n

David<\/span><\/p>\n<\/div>\n


\n<\/span><\/div>\n
David K. Bellman
\nFounder & Principal
\nAll Energy Consulting LLC
\n“Independent analysis and opinions without a bias.”
\n614-356-0484
\ndkb@allenergyconsulting.com<\/a>
\nblog:\u00a0https:\/\/allenergyconsulting.com\/blog\/category\/market-insights\/<\/a><\/span><\/div>\n","protected":false},"excerpt":{"rendered":"

We have recently added a new feature in our gas model allowing users to upload their own forecast for the natural gas markets and to use the tool to produce your power sector demand. \u00a0This is very beneficial for those who shape and produce their own monthly forecast of natural gas fundamentals. In this analysis, […]<\/p>\n","protected":false},"author":1,"featured_media":14,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,3],"tags":[255,273,262,270],"class_list":["post-1123","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-insights","category-natural-gas","tag-gas-demand","tag-gas-power","tag-gas-price","tag-gas-storage"],"_links":{"self":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/1123","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/comments?post=1123"}],"version-history":[{"count":2,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/1123\/revisions"}],"predecessor-version":[{"id":1125,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/1123\/revisions\/1125"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media\/14"}],"wp:attachment":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media?parent=1123"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/categories?post=1123"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/tags?post=1123"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}