Midcontinent gas prices lower despite extreme heat

OREANDA-NEWS. July 29, 2016. Spot prices at key US midcontinent markets have received a boost from summer heat but still lag year-earlier levels on high inventories and increased supplies from the northeast.

July gas prices in the midcontinent are averaging \\$2.67/mmBtu, up by 9pc from June but down by 5pc from the same period in July 2015. Even markets such as Chicago and Mich Con Citygates, which normally trade at a premium to the US benchmark during peak summer heat, have shifted to discount this July.

The shift in prices, despite soaring temperatures, highlights the flood of new supply reaching the midcontinent from the Marcellus and Utica shales and gas stockpiles that have remained at record seasonal levels following the unusually mild 2015-16 winter.

Chicago Citygates this month has averaged a 4?/mmBtu discount to the Henry Hub, compared to a 1?/mmBtu premium the year earlier, while Mich Con Citygates flipped to a 9?/mmBtu discount against the US benchmark from a 7?/mmBtu premium.

Those prices shifts occurred even as cooling demand in July was 38pc higher than normal and electric output surged year over year by 7pc.

Inventories have helped ease concerns about those spikes in demand.

Stockpiles at the 57 Bcf (1.6bn m?) ANR storage site in Michigan were at 87pc of capacity in the week ended 22 July, compared with 57pc a year earlier, despite smaller injections. Injections there since April were 56pc lower than in the year-earlier period.

Blue Lake, a 48 Bcf storage field in Michigan, was 81pc full, up from 51pc a year earlier. Blue Lake injections lagged prior-year levels by 12pc.

Overall midwest inventories as of 22 July stood at 815 Bcf, 20pc above the five-year average and 25pc higher than last year, according to the US Energy Information Administration (EIA).