Market Update: August 9, 2023

Natural gas prices rallied this week as scorching temperatures in Texas continue to push power burns to record levels. This week gas-fired generation in Texas surpassed 8.5 BCF per day which passed last year’s record that was nearly 8.3 BCF per day. Power prices in Texas are driving the demand increase as hourly LMP (locational marginal pricing) power prices spiked over $2000 per megawatt hour two times this last week. The market will continue to focus on weather forecasts and try to determine how storage will fare should temperatures remain hot into September. According to the Weather Channel, Dallas Texas is forecast to stay above 100 degrees each day through August 22nd.

The latest storage report given by the EIA stated a smaller than expected build of 14 BCF. This build pushes inventory levels over the 3 TCF mark but drops the storage surplus to 22.4 percent above last year and 12% above the 5-year average.

Crude oil traded over $83.00 earlier this week but retreated somewhat on Monday due to a stronger US dollar and mixed signals out of China. Chinese exports dropped by 14.5 percent in July compared to one year ago. This decline is the largest since the Covid outbreak in 2020. Even as exports fell JODI (Joint Organizations Data Initiative) is reporting that Chinese demand for oil rose 1.7 million barrels per day which is near record territory. Oil demand in India is also up nearly 2 percent from one year ago.

According to Baker Hughes the total rig count fell again by five rigs bringing the new total to 659 rigs. Oil rigs fell by four while miscellaneous rigs fell by one. Gas rigs remained unchanged. One year ago, the total rig count sat at 764 rigs.

This week’s additional graphic from the EIA depicts power generation additions in the US by fuel source. Natural gas additions were second only to solar through the first half of 2023. Solar power added 5.9 GW while natural gas added 5.7 GW in that time frame.