Friday - March 20, 2015

Active rigs:

	3/20/2015	03/20/2014	03/20/2013	03/20/2012	03/20/2011
Active Rigs	107	195	184	205	172

RBN Energy: Update on natural gas burn for 2015.

Cold weather, abundant supplies of natural gas and lower-than-normal winter gas prices spurred record power burns in January and February, and the power burn for the rest of 2015 is likely to be record-breaking too. It almost has to be; all the gas expected to be produced this year needs to go somewhere, and there’s only so much that can be stored.

That suggests continued softness in natural gas prices—hardly good news for gas producers.

Today, we examine the outlook for this year’s power burn, and the variety of factors that point to record-breaking gas consumption by the U.S. power sector.

For natural gas, the 2012 power burn season was one for the record books. As we said a while back in 2012 Natural Gas Power Burn—Was That a Wild and Crazy Year?, abnormally high gas consumption by the power sector that year [peaking at a record-shattering 1.08 trillion cubic feet (Tcf), or almost 35 Bcf/d, in July 2012] was driven primarily by very low spring and summer gas prices--the result of fast-rising gas production and much-higher-than-normal storage levels at the end of the “non” winter of 2011-12 (2.4 Tcf, vs. the five-year average of less than 1.9 Tcf).

With a return to higher gas prices, the gas power burn sagged in 2013 (peaking at 29.2 Bcf/d, again in July) and 2014 (peaking at 28.9 Bcf/d in August). Now, gas prices (and futures) are down to their lowest level since September 2012, gas storage levels are 500 Bcf higher than they were this time last year, and 2015 gas production is expected to remain strong (likely topping 73 Bcf/d, on average), despite recently announced cutbacks in drilling.

Before we consider the factors suggesting a record-breaking power burn this year, let’s look at the 2012 power burn phenomenon in a little more detail because it helps inform us about this year’s potential. Mild weather and abundant supplies in the winter of 2011-12 precipitated a big post-winter drop in gas prices (to about $2/MMBTU in April 2012).

Gas prices that low (and they stayed below $3/MMBTU through that summer and early fall) get utilities and independent power producers (IPPs) thinking about taking some coal-fired units offline temporarily and replacing their output with energy from gas-fired combined-cycle units.

Much, much more at the link.

Two thoughts come to mind immediately --

• first, the low natural gas prices back in 2012 resulted in record amounts being used; it will be interesting if we see the same thing this Memorial Day weekend -- but with gasoline, not natural gas; will the US set a new Memorial Day weekend gasoline demand record this year with such low gasoline prices?
• second, the "demise" of coal has much more to do with market reality (abundance of cheap natural gas) as with renewable energy, Algore fees and penalties 

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Friends in Low Places

Reuters/Rigzone is reporting:

China will lend Venezuela around $10 billion in coming months, half as part of a bilateral financing deal and the other half for the development of oil fields.

Fresh funds are a boon for financially squeezed Venezuela and will likely increase market confidence over the OPEC country's ability to meet major debt payments and arbitration awards.

Venezuelan bonds rose on Thursday following the news. However, relief may be tempered as the loans appear largely earmarked and will only go so far in countering the steep tumble in oil prices and Venezuela's severe recession.