KMI Kinder Morgan Inc

By Dan Molinski

--Natural-gas prices rose slightly from three-year lows Wednesday as the low prices increased the possibility the power sector will begin using more gas and less coal.

--Natural gas for May delivery ended 0.3% higher at $2.4620 a million British thermal units on the New York Mercantile Exchange. Prices fell 2.7% on Tuesday to $2.4550/mmBtu, the lowest since June 3, 2016.

HIGHLIGHTS

Gas Vs Coal: Gas prices have fallen 17% this year, and that may be encouraging electricity generating plants to start favoring a higher mix of gas and reduced usage of coal, thus boosting gas prices, or at least perhaps preventing further declines.

"U.S. natural gas is now cheaper than Powder River Basin (PRB) coal. Historically, these low price levels have led to higher gas burns from the power sector," said analysts at Bank of America Merrill Lynch in a research note. "PRB coal prices should provide temporary floor to U.S. nat gas despite the recent sell off."

Storage: Any hopes for a stronger rebound in gas prices Wednesday were hurt by expectations that weekly storage data Thursday will show another larger-than-normal increase in domestic gas inventories as production remains strong and comfortable spring weather keeps demand low. Analysts surveyed by The Wall Street Journal said they expect the Energy Information Administration will report an 89-billion-cubic-feet increased in storage for the week ended April 19, compared with an average increase of 47 bcf for that period.

INSIGHT

Sub-Zero: While the main, Henry Hub gas prices are at three-year lows below $2.50/mmBtu, prices paid for gas in the Permian Basin of west Texas and New Mexico have continued to fall well below zero, and Apache Corp. said this week it has began deferring natural gas production in the Permian as a result.

Apache, which is developing a new gas field in the area, said it expects local gas prices to be volatile until Kinder Morgan's Gulf Coast Express pipeline begins operating later this year.

"This is the proper approach from both an environmental and economic perspective relative to other industry practicessuch as flaring or selling associated gas at a negative or unprofitable price," Chief Executive John Christmann said. He added that Apache would pick up production again "as soon as practical."

AHEAD

--The EIA is scheduled to release its weekly report on gas storage Thursday at 10:30 a.m. ET.

Rebecca Elliott contributed to this report.

Write to Dan Molinski at dan.molinski@wsj.com

(END) Dow Jones Newswires

April 24, 2019 15:39 ET (19:39 GMT)

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