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US Weekly Energy Report - 19 October 2017



Market Commentary

The U.S. Federal Energy Regulatory Commission (FERC) approved on Friday two pipeline projects that will move natural gas from Marcellus and Utica shale basins in Pennsylvania, West Virginia, and Ohio to consuming markets in the Southeast. The 303-mile Mountain Valley pipeline will transport up to 2 Bcf per day to Virginia, while the 600-mile Atlantic Coast pipeline will move up to 1.5 Bcf per day to Virginia and North Carolina. Mountain Valley is expected to be in service by the end of 2018, with construction on the Atlantic Coast project targeting completion in late 2019.

The independent market monitor for the Electric Reliability Council of Texas (ERCOT) reported this week that reserve margins in the state are likely to dip below the targeted 13.75% in 2018. The assessment is driven by recent announcements on planned generating capacity retirements of 4,500 MW, including the closure of the Big Brown, Sandow and Monticello coal-fired plants. ERCOT reserve margins, which represent the amount of available capacity above expected peak demand levels, could shrink to 12.4% next summer and are projected to fall as low as 10.6% in the summer of 2022.

The U.S. Energy Information Administration (EIA) announced on Wednesday that domestic coal production averaged 192 million short tons per quarter in the first half of 2017. This represents an increase from the same period last year, but a decline from the levels reached in the second half of 2016. Overall output was driven lower by weaker demand for steam coal, which powers electricity generation and accounts for more than 90% of total U.S. production.

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