Extreme year-on-year U.S. natural gas demand growth necessary to diminish infrastructure constraints and curtail producer shut-ins as storage continues to approach operational capacity

Thursday, June 07, 2012

BENTEK's Market Alert, Gas Tank Full: Henry Hub Will Re-Test Price Floor, reports strong weather-adjusted demand from power will have to continue if the current U.S. natural gas market is to avoid severe production shut-ins by the end of summer. Even in a scenario where production remains flat for the entire injection season, total demand will need to average 6.3 Bcf/d stronger than the five-year summer average in order to avoid infrastructure constraints. In addition, gas production will need to be curtailed 0.9 Bcf/d in non-Northeast basins. BENTEK’s Market Alert projects that these fundamental factors will lead to weak natural gas spot prices this summer, with Henry Hub cash prices dropping below $2.00 this fall as temperatures drop and demand declines.

BENTEK’s Gas Tank Full: Henry Hub Will Re-Test Price Floor provides essential fundamental analysis on the factors influencing the 2012 U.S. storage surplus, including injection rates, power demand and production curtailments.

Key takeaways from BENTEK’s Gas Tank Full Market Alert:

• The April-ending 0.9-Tcf storage surplus will force the U.S. natural gas market to test operational storage constraints by the end of the injection season.

• These constraints will lead the market to extremes in several key fundamentals, including injection rates, power demand and production curtailments.

• Extreme year-on-year demand growth will help diminish constraints, with total demand forecast to average 6.3 Bcf/d stronger than 5-year average summer burn.

• Up to 0.9 Bcf/d of production curtailment from non-Northeast basins also is necessary to lessen storage inventories.

• The market will elicit the needed behavior through low pricing, averaging in the $2.00-$2.75 range during the peak of the cooling season, with a $1.00-handle monthly average at the end of the summer.

This Market Alert includes dynamic graphs and charts that allow you to click through to an Analytical Storyboard, where you can watch these market developments unfold over time. When you see the "hand" icon next to a chart or graph, click on the link and you will be connected to BENport to view the dynamic data. This feature is for clients only. You must have a BENport account and use Internet Explorer to access this feature.


The Market Call is BENTEK's monthly publication that pulls together the fundamental natural gas market dynamics to provide a comprehensive, forward-looking view of the U.S. market, including a sector-by-sector analysis of the underlying factors that drive prices.

BENTEK's U.S. Power Burn Report provides a daily resource for U.S. gas demand in the power sector, including in-depth regional power burn data. This report provides year-on-year power burn demand comparisons as well as 14-day regional demand forecasts.

To learn more, please contact your BENTEK sales representative or call BENTEK Sales at 1-888-251-1264.