(Adds named item code KEMP/)
* Chart 1: reut.rs/2ooOkZf
* Chart 2: tmsnrt.rs/2mVt7sx
* Chart 3: tmsnrt.rs/2mVnnPP
* Chart 4: tmsnrt.rs/2nqxTL3
* Chart 5: tmsnrt.rs/2ogPg4w
* Chart 6: tmsnrt.rs/2ogJKyN
* Chart 7: tmsnrt.rs/2ogRwIZ
By John Kemp
LONDON, March 31 The U.S. gas market is looking
a little tight despite another record warm winter that limited
Growing structural consumption from electric power producers
as well as increasing exports are significantly changing the
balance between supply and demand.
Consumption (including exports) is now running higher for
any given level of heating and cooling demand with the result
the market wants to carry a higher level of inventories.
Stocks of working gas in underground storage stood at 2,049
billion cubic feet on March 24, according to the U.S. Energy
Stocks are 425 billion cubic feet, around 17 percent, lower
than at the corresponding point in 2016 (reut.rs/2ooOkZf).
Stocks have generally remained lower this winter even though
temperatures broadly matched the record warmth in 2015/16 (tmsnrt.rs/2mVt7sx).
Inventories are still 250 billion cubic feet (14 percent)
above the five-year average, according to the U.S. Energy
But stocks do not look excessive given the underlying
increase in consumption from new and planned gas-fired power
plants and scheduled increases in export capacity.
Gas-fired generation capacity has increased from 432
gigawatts (GW) at the end of 2014 to 447 GW at the end of 2016
Capacity has increased in the last two years by the
equivalent of the entire generation capacity of the state of
Minnesota ("New wave of power plants if fuelling U.S. gas
demand", Reuters, Oct. 2016).
Most of new gas units are super-efficient combined cycle
plants designed to operate for thousands of hours each year as
And U.S. power producers are planning to add 37 another
gigawatts of gas-fired capacity during 2017/18, roughly
equivalent to the entire generating capacity of the state of
Gas-fired capacity is set to rise by a further 8 percent
before the end of 2018 ("Natural gas-fired generating capacity
likely to increase over next two years", EIA, Jan. 30).
"Depending on the timing and utilization of these plants,
new additions could help natural gas maintain its status as the
primary energy source for power generation, even if natural gas
prices rise moderately", according to EIA.
U.S. gas exports are also rising, hitting a record 248
billion cubic feet in December 2016, up more than 50 percent
compared with the same month a year earlier (tmsnrt.rs/2ogPg4w).
Underlying demand from power plant operators and exporters
is making the market much tighter than the level of stocks
implies on its own.
Prices have already risen to conserve stocks by encouraging
power producers to run their gas-fired plants for fewer hours in
the summer of 2017 and use coal-fired plants instead.
Futures prices for deliveries at Henry Hub in June 2017 are
up to almost $3.30 per million British thermal units from less
than $2.70 a year ago.
The calendar spread from June 2017 to June 2018 has shifted
to a backwardation of 40 cents from a contango of 7 cents at the
same last year (tmsnrt.rs/2ogJKyN).
Backwardation is a sign of an under-supplied market trying
to conserve remaining stocks by raising the cost of short-term
consumption, curb exports and stimulate more production.
The U.S. gas market feels slightly tight despite coming out
of one of the warmest, if not the warmest, winters on record.
That marks a profound change from 2016 when the market felt
heavily oversupplied coming out of a similar winter (tmsnrt.rs/2ogRwIZ).
The shift (same weather, radically different price
structure) shows just how quickly the dynamics of the U.S. gas
market are changing.
(Editing by David Evans)