Awash In Natural Gas

Last August I warned that a Natural Gas Price Spike May Be Looming. The reason for the warning was that natural gas in storage – which the Energy Information Administration (EIA) reports every Thursday – had fallen to abnormally low levels just ahead of high-demand season.

Indeed, natural gas inventories remained low throughout the fall, and by November prices had spiked by 60%. By late November, it seemed that prices were destined to hit the $5 per million British thermal units (MMBtu) level.

However, the price peaked about the time inventory levels began to head back to the lower end of the normal range. Last week’s report marked the first time since last June that the level reached the lower end of the 5-year minimum range:

As natural gas levels headed toward the normal range, prices tumbled. From a close of $4.70/MMBtu in November, prices during the first week of January fell back below $3.00/MMBtu.

Natural gas inventories are still about 11% below average for this time of year, and there is a lot of winter left. But, unless the rest of the winter is unseasonably cold, the recent trend suggests that natural gas prices may spend most of 2019 below $3.00.

Demand for natural gas continues to grow along multiple fronts. For example, the EIA reported that liquefied natural gas (LNG) exports set two consecutive monthly records in November and December 2018. EIA estimates that LNG exports averaged 3.6 billion cubic feet per day (Bcf/d) in November and 3.9 Bcf/d in December.

Author: Robert Rapier

Robert Rapier is a seasoned chemical engineer with three decades of international experience in the energy sector. He holds undergraduate degrees in chemistry and mathematics, and a master’s in chemical engineering. Robert has worked extensively in oil refining, production, synthetic fuels, biomass energy, and alcohol production, earning several patents along the way. As Editor-in-Chief of Shale Magazine and a prolific author for Investing Daily, he shares his expertise through various newsletters and his latest book, American Energy: A History of Power, Progress, and Change. Robert's insights have been featured on 60 Minutes, The History Channel, CNBC, and PBS, among others. His articles have appeared in top publications like the Wall Street Journal, Washington Post, and The Economist. For nearly a decade, he has covered the energy sector for Forbes. View all posts by Robert Rapier