Strong points

Producer demand sets record in early June at 39.6 Bcf / d

Wind production in SPP, the MISO drops sharply this month

Henry Hub’s $ 3 gas price dampens summer outlook

Warm early summer weather and declining wind generation have pushed gas-fired electricity use in the United States to seasonal highs this month, but rising gas prices threaten to dampen the recovery .

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On June 9, total producer demand exceeded 39.6 Bcf / d, marking a record demand in late spring before the official start of summer on June 20, according to data from S&P Global Platts Analytics.

This month’s record came as population-weighted temperatures along the East Coast, Southeast and Texas surpassed 80 degrees Fahrenheit, causing an electrical cooling wave.

However, electricity consumption in June outperformed, even on a temperature-adjusted basis.

On June 9, the population-weighted temperature in the United States was around 77 F – a high temperature, but not atypical, for early June. Last year, and in previous summer seasons, similar temperatures resulted in significantly lower demand for gas from generators.

Wind power

Beyond the warm temperatures this month, declining wind generation also appears to be a contributing factor to the recent recovery in gas-fired electricity. In the Southwest Power Pool and the Midwest Independent System Operator, gas gained market share this month as wind generation declined.

In SPP, wind generation fell to an average of 185,500 MWh in June, from around 260,600 MWh in May. The gas market share during that period has climbed to nearly 25% this month, from around 19% last month, according to ISO data.

At MISO, wind generation also declined in June, averaging around 137,300 MWh since the start of the month, compared to an average of 168,000 MWh in May. As a result, the gas market share in MISO is also on the rise, reaching around 33% this month from an average of 28% last month, according to MISO data.

Burn prospects

Despite the recent single-day high, electricity consumption this month remains slightly below its level of a year ago.

Across the United States, burns are averaging about 35.4 Bcf / d this month, compared to levels closer to 35.7 Bcf / d since the start of last June. Over the next two weeks, rising temperatures are expected to bring this month’s average to around 36 Gcf / d – potentially above 35.2 Gcf / d in the first three weeks of June 2020, according to data from Platts Analytics.

Higher gas prices this year compared to last could dampen generator demand this month and potentially the remainder of the summer season. For much of the first quarter, rising gas prices were likely responsible for the decrease in burns this year compared to those recorded in the first quarter of 2020.

So far this year, U.S. gas Henry Hub has traded on average at $ 3.11 / MMBtu – pulled higher in part by a brief run of record settlement prices in mid-February. In comparison, over the same roughly six-month period last year, the benchmark price was on average only $ 1.79 / MMBtu.

In SPP, MISO, PJM and ERCOT, a wave of economically motivated fuel switching has reduced gas market share this year as many producers switch to low-cost coal production, according to ISO data.

The hot weather this summer could be a partial offsetting factor, potentially increasing the total use of generating capacity as the demand for electric cooling increases. According to the most recent seasonal forecast from the National Weather Service, temperatures in almost all parts of the United States face a 33% risk, up to 60%, of staying above average in June, July. and August.

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