Genscape Inc.’s latest production data Wednesday showed total Lower 48 volumes dipping back below the 80 Bcf/d threshold on a drop in volumes from the Permian Basin, according to senior natural gas analyst Rick Margolin. Earlier in the week, Permian volumes on average fell below 8 Bcf/d for the second day this month, “though those volumes were revised to just a tick above 8 Bcf/d,” Margolin said. “However, volumes out of the area are still running about 0.3 Bcf/d below” levels from earlier in the month. “We are seeing notable drops in interstate receipts from the Ramsay and Midkiff facilities/areas,” he said. “Ramsay plant volumes hitting El Paso Natural Gas had at one point dropped more than 0.5 Bcf/d. It is unclear if any volumes out of the plant are getting re-routed to nontransparent” intrastate pipelines. The dip in supply comes as power burns are likely to pull back over the next few days, though July is still on a record-setting pace, according to Margolin.
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Shell plans to resume normal operations within hours at its oil refinery in Wesseling in western Germany after a power cut external to its site triggered security measures and flaring, a spokesman said on Wednesday. Refinery monitor Genscape said in a report that all units were shut at around 1313 GMT on Wednesday at the 140,000 barrel per day refinery.
A major Mexican pipeline opened this week after almost two years of delays. That’s the good news for drillers across the border who are seeking an expanded market for natural gas siphoned from the pent-up Permian Basin. The bad news: The conduit won’t fill to capacity until construction is completed on the new power plants it’s designed to serve. As such, the pipeline joins two others recently opened that carry minimal amounts of gas. Welcome to the stop-and-go world of Mexico power. Most recently, Mexico has offered “a bridge to nowhere” for American gas supplies, said Esteban Trejo, a Genscape Inc. analyst in Boulder, Colorado. “It’s just another example of where the pipelines are declared in-service and there isn’t demand.”
It’s already been an expensive July for the Texas grid, with day-ahead prices from 5 p.m. to 6 p.m. in Dallas averaging $125.98 a megawatt-hour, almost double the July average for 2017 and the most for the month since 2011. The last time prices were higher was Aug. 10-11, 2015, when wholesale power reached $2,233 a megawatt hour. During that heat wave, the mercury touched 107 degrees in Dallas and demand peaked at 69,800 megawatts, according to Genscape Inc. which monitors power markets. Accuweather.com forecasts Dallas will reach 107 degrees July 20 as the heat settles in.
Maintenance on Tennessee Gas Pipeline (TGP) this week should impact exports into Ontario, according to Genscape Inc. “TGP will be conducting pigging work on Segment 296 near the Canadian Border in New York that will reduce operational capacity through Station 230C from 743 MMcf/d to 410 MMcf/d” from Thursday to July 28, Genscape analyst Vanessa Witte said. “Average nominations into Segment 296, taken at ‘Niagara Spur North,’ have been 647 MMcf/d, which would represent a decrease of around 237 MMcf/d if the capacity reductions materialize into actual flow reductions.” In May, a similar event restricted operational capacity at the location to 315 MMcf/d but did not result in any changes to nominations, Witte said. Elsewhere in the Northeast, “Algonquin has added a new meter for the 200 MW Exelon West Medway II power plant in Norfolk County, MA,” Genscape analysts Josh Garcia and Aziza Dawhar told clients Tuesday. “This location has an operational capacity of 94 MMcf/d and has not scheduled any flows yet as completion is planned for Q42018. “Exelon has modified the existing 173 MW West Medway Generating Station by constructing two new quick-starting simple-cycle gas-fired combustion turbines, with ultra low sulfur diesel fuel as a backup,” Garcia and Dawhar said. “Constructed as a peaker plant, this additional source of demand on an already supply constrained system adds upside risk to Algonquin’s price volatility, especially during winter peak demand.”
Benchmark northwest European gasoline refining margins fell on Tuesday after two refineries restarted gasoline-making units. Petronor said on Tuesday that it was restarting a gasoline-making fluid catalytic cracker at its 220,000 barrels per day (bpd) Bilbao oil refinery in northern Spain after it was taken offline on July 13 to perform maintenance. Industry monitor Genscape said late on Monday that ExxonMobil has restarted the 47,000 bpd FCC at its Augusta refinery in Italy after it shut down in March because of a fire.
An uptick in production combined with a drop in heat-driven demand could put bearish pressure on Henry Hub spot prices this week, according to Genscape Inc. senior natural gas analyst Rick Margolin. “Our SpringRock pipeline-based production estimate has Lower 48 volumes for Monday back above 80.3 Bcf/d after lurking in the upper 79s for the weekend,” Margolin said. This includes gains from Leach XPress returning to full service. “Meanwhile, on the demand side, a swath of cooler temperatures is forecast to move into Midwest, Northeast (excluding New England) and Southeast markets, which are driving our Lower 48 supply and demand power burn forecast down to an average 36.3 Bcf/d for the coming seven days, about 2.4 Bcf/d off last week’s number,” he said. “However, notable exceptions will occur in Texas and along the West coast, where cooling demand will be buoyed by daytime highs in Seattle, San Francisco and Los Angeles running about 6-12 degrees above normal in the early part of the week.” Prices at SoCal Citygate shot up Monday as temperatures in Southern California were expected to remain plenty hot this week. Radiant Solutions was forecasting highs in the low 90s over the next several days for Burbank, CA, with temperatures there averaging about 5 degrees above normal.
Columbia Gas Transmission LLC (TCO) has completed repair work and restored service on Leach XPress more than a month after the pipeline exploded in Marshall County, WV. The company told customers over the weekend that the Pipeline and Hazardous Materials Safety Administration (PHMSA) approved flows on the line, allowing it to lift the force majeure it declared last month. The Stagecoach and LXPSEG meters were returned to service last week. Gibraltar III, Majorsville-LXP and Eureka have also been restored, while LoneOak A has been restored to non-firm capacity. Genscape Inc. analyst Vanessa Witte told clients on Monday that all locations showed nominations effective Sunday with the exception of Gibraltar III. Before the explosion, Leach XPress was flowing on average 1.4 Bcf/d, she said, and 1.15 Bcf/d was scheduled for Monday as of evening cycle nominations.
Grain is not the only sector where CN has faced operational difficulties in recent months. With a sharp upturn in crude oil production in western Canada, rail is under pressure to provide additional capacity, and fast. According to Genscape, which monitors Canadian oil production, crude-by-rail (CBR) shipments in Canada increased from around 50,000 barrels per day in July 2017 to more than 100,000 barrels per day by the end of the year. CN says it is anticipating further CBR growth through the remainder of 2017 and it has been asking shippers to provide volume commitments and sign up to a minimum 12-month contract. CN has set its 2018 capital budget at a record $C 3.4bn and this figure includes significant investment in new equipment and infrastructure, which is intended to deliver the long-term network resiliency demanded by shippers.
The Trump administration is cracking down on Venezuela and laying down threats of the toughest sanctions Iran has ever seen, adding to the risk premium for oil while there are signs that U.S. and global supplies are tightening. Genscape reported another 765,826 drawdowns in supply. While some are distressed with the Trump administration hard line on countries, it appears to be bearing fruit with China. Just one day after the U.S. and China declared a truce on the trade war, China lowered their quota on auto imports, reducing its tariff to 15% from 25%. That will add to the economic optimism giving hope for demand for industrial metals as well as demand prospects for oil.