Natural Gas Set to Fill Power Gap in Western USA
(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author.)
The Western United States will likely depend more heavily on natural gas to generate electricity in the near-term, according to one of Rigzone’s regular market prognosticators. Find out why, along with other insights, in this preview of what to watch this week in the oil and gas markets.
Mark Le Dain, vice president of strategy with the oil and gas data firm Validere: West Coast gas prices continue to climb. Drought in certain areas of the western U.S. is reducing hydro capacity, which is a major provider of consistent base load power in those regions. Natural gas will be a larger part of the power stack in the regions and, as summer heat forecasts come in, we could see this really climb in combination with this dynamic.
Jon Donnel, Managing Director, B. Riley Advisory Services: Overall, demand is still moving in the right direction with the Energy Information Administration (EIA) increasing its forecast for U.S. fuel consumption by about 100,000 barrels per day versus prior estimates. U.S. producers have largely held firm on capital budgets and activity levels as rig and frac spread counts appear to have plateaued, despite the run in commodity prices. These signs all point to a strong foundation for the industry and an ability to absorb externalities while continuing to generate positive free cash flow and improve balance sheets. A few more months like this and there may even be room for some meaningful improvement in oilfield service pricing (fingers crossed).
Tom Seng, Director – School of Energy Economics, Policy and Commerce, University of Tulsa’s Collins College of Business: There now exist several wildcards the market will have to monitor daily, if not hourly, this week. Are negotiations progressing between the U.S. and Iran – and between Israel and Hamas? Is the spread of coronavirus continuing in countries like India, the world’s 2nd-largest importer of crude? Will sustained $70-per-barrel prices for WTI finally incent U.S. shale producers to increase E&P activities?
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