Less domestic natural gas production and more power generation demand should push natural gas prices higher in the third quarter of 2020, but prices are down since the last analysis published by the U.S. Energy Information Administration.
The EIA in its March 11 Short-Term Energy Outlook estimates prices at the benchmark Henry Hub will average $2.22/MMBtu in the third quarter, with the average price for the year expected to be $2.11/MMBtu, 10 cents less than forecast in February.
The share of natural gas use for power generation in the U.S. is expected to increase to 39 percent in 2020 from 37 percent in 2019. Renewables generation should increase from 17 percent to 19 percent, attributed to greater amounts of solar and wind generation. Nuclear generation should remain flat.
Analysts delayed the report's release to "incorporate recent significant global oil developments." The agency notes commodities markets have been volatile, with prices declining since late February amid concerns over the economic effects of COVID-19 coupled with decreased oil prices.
National working natural gas in storage was 2,043 Bcf as of March 6, according to EIA estimates. This is a net decrease of 48 Bcf compared with the previous week.
Natural gas demand decreased 10 percent week over week due to warmer weather. Natural gas usage for power generation fell 6 percent week over week, according to the EIA.
Henry Hub natural gas values ticked up a cent to $1.83/MMBtu in March 5 to March 12 trading.
Western natural gas prices generally gained between 6 cents and as much as $1.09 in the trading period. PG&E CityGate posted the greatest increase, adding $1.09 to reach $2.73/MMBtu.
Southern California natural gas values rose based on supply constraints, EIA analysts said in the agency's weekly report. El Paso Natural Gas Pipeline Co. declared a force majeure at the Topock Compressor Station in San Bernardino March 10. Capacity was decreased by 50 to 100 MMcf per day until further notice.
SoCal CityGate added a quarter in trading to reach $2.35/MMBtu, while SoCal Border edged 6 cents higher to $1.64/MMBtu. El Paso-San Juan Basin natural gas was the exception, moving down 13 cents to $1.23/MMBtu in the trading period.
Likewise, Western peak power prices increased between $2.65 and as much as $12 in trading. California-Oregon Border daytime power gained the most, up $12 to $35/MWh by March 12. Prices ranged from $23.60/MWh at Mid-Columbia to $35/MWh at COB.
Western nighttime power prices followed suit, adding between $1.35 and $9 in trading.
California Independent System Operator demand reached 27,543 MW March 12, which should be the week's high. Northwest Power Pool demand reached 68,843 MW March 9.