From WSJ: Natural gas prices drop 4% to close at $2.1850/mmBtu, the lowest closing price since May 27, 2016 and the largest one-day decline this month, after the EIA reported a larger-than-forecast 115-billion-cubic-feet rise in storage for the week ended June 14.

“For the sixth consecutive week, the EIA has reported a triple-digit injection. This is the first time this has happened since 2014,” says Austin, Texas-based Drillinginfo. “With the summer’s peak demand season just around the corner, don’t expect the triple-digit injections to hang around much longer. As power burn ramps up in July and August, some of the gas that is currently being injected into storage will need to be used to meet power burn demand.”

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The daily future price is a great opportunity for energy media journalist to base articles on.  However the future price is for paper trades, not (or rarely) physical gas volumes.  The price that has the closest relationship to the price that appears on a royalty statement is the monthly settlement price.  Physical gas volumes sales are based on the monthly settlement, either a discount or a premium to that price.  The monthly settlement price for the subsequent month is posted in the last few days of the preceding month.  So the monthly settlement for July will be posted the last few days of this month. 

The July Settlement has already been posted.  A little earlier than usual but a decent uptick in price.  Most welcome.

NYMEX  -  NATURAL  GAS  CONTRACT  SETTLEMENT PRICE  HISTORY

YEAR    JAN    FEB     MAR    APR    MAY    JUN     JUL     AUG    SEP    OCT    NOV   DEC   YR AVG

2018     2.738  3.631  2.639  2.691  2.821  2.875  2.996  2.822  2.895  3.021  3.185   4.715    3.086

2019     3.642  2.950  2.855  2.713  2.566  2.633  2.893

I don't recall seeing this happen before. This posting isn't a day ahead of the usual posting date, it's a WEEK ahead. Weird! Do you have a link for where that came from? thanks.

I don't either.  This could be an entry error.  After I posted the link below and checked to make sure it was functional, the July price had disappeared.  If I hadn't posted it above I would be wondering if somehow I did something wrong.  It looks like someone inadvertently took the average month to date and posted it under July.

NYMEX - NATURAL GAS CONTRACT SETTLEMENT PRICE HISTORY

gsfi.net/common/NYMEXSettlementHistory.pdf

 

Thanks Skip.  Although $2.89 is certainly better than $2.19, it's still pretty sad...

Such is the state of natural gas supply.  It always runs ahead of and tends to obscure some healthy annual increases in demand.  For the mineral owner, yes the price is disappointing but for the continued increase in natural gas use and the retirement of coal fired electric generation, the low price is good.  As to the Haynesville Shale, I think that 80+ percent of recoverable reserves have yet to be produced.  And that when all is said and done a good bit of those reserves would have brought better prices.  We are never going back to double digit prices but I think that an annual average price of $3.10 to $3.50/mcf creates reasonable returns for Haynesville operators and serves to make the post production net more palatable for royalty interests.  If US LNG is going to be competitive globally, natural gas prices will have to remain low.  We will be competing against other exporting countries that either have lower production costs (Qatar) or are much closer in distance to major buyers (Australia).

Here is a cut-and-paste from the monthly settlement prices for June and July, 2015 - 2019.  As you can see that is a lot of variability in the trend as summer heats up.  Two elements come into play at this time:  heat days (a measure of air conditioner use/electric grid demand) and monthly injection volumes.  If the weather is relatively mild and the injection is above yoy or five year averages then the price should drop.  If the reverse occurs, the price can actually increase with 2016 being an extreme example.

YEAR             JUN     JUL

2015                2.875   2.773  

2016                1.963   2.917              

2017                3.236   3.067  

2018                2.875   2.996

2019                2.633   ------

Skip:

A speaker at a recent talk at the AAPL Annual Meeting cited current domestic gas production at over 100 bcfd.  Marcellus/Utica is at around 30 bcfd.  Permian gas production is at over 9 bcfd as an associated secondary product with insufficient takeaway capacity to transport the gas produced - negative strip prices at Waha is becoming more of a "normal thing".  The only upside potential in the current environment will be related to exports, higher domestic consumption for power and/or industry use e.g., petrochem.

Thanks, Dion.  Power burn and industry use appear to continue increasing but both seem difficult to measure in anything close to real time.  Export volume increases but the trade war threatens in the short term.  More export capacity is a couple of years off.  We seem stuck in a never ending loop of increasing demand outstripped by increasing supply.  When the bottle neck comes out of WaHa the Gulf Coast will be awash in natural gas supply.

Skip:

Short term solution to the Waha glut would be finishing the infrastructure builds to the gas-fire plants in Mexico.  It'll also relieve supply constraints to have extra capacity feeding Corpus LNG as well.  Petrochem synthesis using ng as feedstock becomes increasingly profitable at rates above 20-24:1 oil:gas ratio (syngas, methanol, GTL syntheses).

Thanks, Dion.

Dion,

I like your comments on this solution option. I wonder if this could ever get done in today's political climate?

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