Opinion

S&P Global Platts FACTBOX - Natural Gas Demand Normalizes as Utilities Restore Hurricane Florence Outages

Posted by OilVoice Press - OilVoice

18-Sep-2018


With Tropical Depression Florence now making its way northeast through Appalachia, utilities in the Carolinas made progress restoring the grid Monday, leading to increased power demand.

That recovery in load also increased natural gas demand for power generation, contributing to a near 30 cent/MMBtu leap in natural gas prices in the region.

Gasoline and diesel remained a few cents below pre-Florence levels as disruptions to refined products transportation infrastructure never materialized.

Meanwhile other infrastructure was returning to normal operations with, for instance, a new Mercedes Benz plant in North Charleston, South Carolina resuming operations and construction underway again at the Elba Island LNG terminal.

Florence is expected to track across Pennsylvania Tuesday, dropping heavy rainfall along the way, before heading back out to sea by midday Wednesday. Here are the key takeaways across commodities:

OIL

PRICES

  • NYMEX RBOB gasoline and ULSD futures rallied last week ahead of Florence, on concerns that the storm would disrupt service on the Colonial Pipeline or Plantation Pipeline. The pipelines deliver refined products from the US Gulf Coast to the US East Coast. However, prices turned lower by the end of the week once the market was more confident that the pipelines were operating normally.
  • NYMEX October RBOB settled at $1.9768/gal Monday, down 5.80 cents/gal from the peak of the price rally last Wednesday. NYMEX October ULSD settled at $2.2064/gal Monday, down 5.13 cents/gal from last Wednesday.

INFRASTRUCTURE

  • The Northeast is heavily dependent on the Colonial and Plantation pipelines for refined products supplies, both of which run through the Carolinas. Both pipelines were operating normally Monday.
  • The North Carolina ports of Wilmington and Morehead City will remain closed until Wednesday, North Carolina Ports advised in an alert Sunday, citing storm damage to warehouses at both locations and a substantial number of downed empty containers.
  • Kinder Morgan's terminals in South Carolina were open and operational, the company said late Sunday, adding that it was working with local authorities to re-enter the facilities in Wilmington, North Carolina, on Monday.
  • The ports of Charleston and Georgetown in South Carolina were reopened without restriction Saturday, according to the US Coast Guard. The port of Norfolk, Virginia, a key bunkering port, was open Saturday. In Georgia, the port of Savannah also reopened early Saturday morning.
NATURAL GAS

TRADE FLOWS

  • With weather in the Carolinas region normalizing and significant progress restoring power outages, demand has begun to recover
  • Total demand for the Carolinas on Sunday was revised up to 1.9 Bcf/d, 500 MMcf/d below pre-Florence levels. This suggests Monday's 1.7 Bcf/d demand estimate could be revised up as well.

PRICES

  • Transco Zone 5, among the trading hubs under pressure by prior demand destruction, rebounded nearly 30 cents/MMBtu on Monday to $3.12/MMBtu led by increased demand for power generation.

INFRASTRUCTURE

  • EQT, developers of the 300-mile Mountain Valley Pipeline, said rainfall was lower than expected. The company continues to monitor the situation with construction and make enhancements as necessary.
  • Dominion Energy, which is building the 1.5 Bcf/d Atlantic Coast pipeline, said the project had not had any meaningful setbacks related to the storm.
LNG

TRADE FLOWS

  • Cove Point feedgas deliveries remained about 60% below capacity at 300 MMcf/d Monday, according to Platts Analytics data. It is unclear if the lower volumes are related to Hurricane Florence.

INFRASTRUCTURE

  • As expected, Kinder Morgan resumed construction on the Elba Island LNG terminal in Georgia. The existing terminal facilities remained in operation, the company said.
POWER

TRADE FLOWS

  • Load in the hurricane-impacted area continued to recover Monday. Demand in the Duke Energy Progress East region was expected to peak at 7.9 GW on Monday, about 58% above Saturday's low watermark for daily peakload since Florence hit.

PRICES

  • Despite some outages showing up in the region, real-time power prices in the PJM Interconnection hit a range of $150 to $180/MWh, partly because natural gas prices were higher and actual load was surpassing forecast.
  • Meanwhile further southeast, bilateral day-ahead on-peak power prices rose as the storm moved out and above-normal temperatures were forecast to linger. On the Intercontinental Exchange, Into Southern's bid/offer midpoint in the mid-$70s/MWh was about 67% higher than prices for Monday delivery.
  • Into GTC counterparts were bid in the low $60s/MWh and offered in the mid-$120s/MWh, almost double prices for Monday flow.

INFRASTRUCTURE

  • As of about 4 pm EDT Monday, utilities in the Carolinas, Virginia and West Virginia reported about 434,598 customers without power, down from about 728,000 as of 1 pm Sunday, including the following:
    • Duke Energy: 279,279 outages
    • North Carolina Electric Cooperatives: 141,485 outages
    • Appalachian Power: 7,646 outages
    • Dominion Energy: 5,620 outages
    • Electric Cooperatives of South Carolina: 291 outages
METALS

TRADE FLOWS

  • The Mercedes-Benz Vans plant in North Charleston, South Carolina — which opened officially just 11 days ago — reopened Monday morning, after being shut and evacuated ahead of the hurricane on Tuesday September 11.
  • The US Coast Guard and the Port of Virginia reopened the main shipping channel and all terminals Saturday morning after Florence resulted in little impact at the country's biggest coal-shipping artery.

PRICES

  • The S&P Global Platts assessment of US East Coast low-volatile hard coking coal closed at $193/metric ton FOB Monday, up $16/mt from September 7.
  • Platts' US high-vol A index remained unchanged at $202/mt FOB USEC. The Platts US high-vol B assessment also held at $170/mt FOB USEC.
  • There was no storm-related impact on steel pricing, notwithstanding the fact that nine primary steel mills were in the path of Florence — totaling nearly 10 million st/year of raw steelmaking capacity, or approximately 8% of total steel capacity in the US.
  • The Platts benchmark price for steel hot-rolled coil, a product made at Nucor Steel Berkeley in Huger, South Carolina, remained unchanged at $855.75/st Monday

INFRASTRUCTURE

  • Nucor Steel Hertford in North Carolina, one of the country's largest steel plate mills, resumed operations on Monday. Normal operations have resumed at all of the Charlotte-based steelmaker's plants in North and South Carolina.



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S&P Global Plattsnatural gasgasHurricaneHurricane FlorenceUnited StatesLNGLiquified Natural GasOilPower

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