Volume 10, Issue 5 | February 3, 2012

Editor's Note

Prices Close Relatively Flat This Week.

Week in review for period of Jan. 27 - Feb. 2, 2012

In last week's update, we reported that the 12-month average price for natural gas on the NYMEX rose 10%, and the 12-month average price for peak power on the PJM rose 4%. This was the first measurable increase since December 1, 2011. However, with the lack of any significant heating demand, the Bulls had a hard time mimicking last week's price rally. The market closed relatively flat compared to last week's numbers. For this seven-day report period, the 12-month average price for natural gas on the NYMEX rose 2%, and the 12-month average price for peak power on the PJM fell 1%.

For now, the bottom line remains the same. We are enjoying a large supply of natural gas because much warmer-than-normal temperatures are limiting demand for heating so far this winter. As a result, the natural gas storage surplus is now 25% greater than the five-year average. Supplies are high and demand is low.

On Groundhog Day, February 2, 2012, Punxsutawney Phil saw his shadow. According to legend, this means we will have six more weeks of winter. Colder temperatures could place upward pressure on prices. However, for this year, Phil's forecast may be incorrect because Old Man Winter hasn't even shown up.

Are prices at the bottom? Here is one variable to watch: If natural gas prices stay low, producers will shut-in their wells because it will be economically attractive for them. For now, prices are trading at very low levels. This is still a great time to look at an early renewal strategy.


Natural Gas Fundamentals

Natural Gas Storage Update: Data Released February 2, 2012


 

 Current Week

Last Week 

Net Change

 This Week Last Year 

 Prior 5 Year Average

 

 Stocks (Bcf)

Stocks (Bcf)

 (Bcf)

Stocks (Bcf)

 Average (Bcf)

 Total Lower 48

2,966

3,098

 -132

2,380

2,365

Storage Update: For the second week in a row, EIA reported another larger than expected withdrawal. For this report period we saw a triple-digit withdrawal of 132 Bcf. However, last year at this time, the withdrawal was 187 Bcf. The five-year average withdrawal was 186 Bcf. Thus, in spite of this larger-than-expected withdrawal, the year-to-year gas surplus grew again. The year-to-year surplus grew from 20% to 24%. The surplus over the five-year average grew from 21% to 25%.


Baker Hughes Rotary Rig Count For Natural Gas

Weekly Drilling Rig Update:  Active US gas rig count released by Baker and Hughes for the week ending Jan. 27, 2012 was 777 rigs. The count is 136 rigs lower than the count reported this same week last year. We are 32% below the five-year average gas rig count of 1,144.


NYMEX Natural Gas Monthly Settlements For the Past 12 Months

(Price per therm at the well-head)

This was the closing price of gas at the well head for each of the past 12 months. The closing price for a month occurs on the 3rd business day prior to the start of the month. 

Mar-11

$0.3793

July-11

$0.4357

Nov-11 

$0.3524

April-11

$0.4240

Aug-11

$0.4370

Dec-11 

$0.3364

May-11

$0.4377

Sept-11

$0.3857

Jan-12 

$0.3084

Jun-11

$0.4326

Oct-11

$0.3759

Feb-12

$0.2678


NYMEX Values Per Month For the Forward 12 Months

Thursday, February 2, 2012

(NYMEX - Price per therm at the Henry Hub well-head)

Mar-12

$0.2554

Aug-12

$0.2998

Jan-13

$0.3614

April-12

$0.2715

Sept-12

$0.3010

Feb-13

$0.3617

May-12

$0.2819

Oct-12

$0.3054

12-month

$0.3078

June-12

$0.2900

Nov-12

$0.3203

11/11-3/12

$0.26160

July-12

$0.2967

Dec-12

$0.3484

Crude Oil

$96/barrel 


NYMEX Graph For Natural Gas - 12 Month Average Price Per Therm at the Well-Head

(Excludes Interstate Transportation)

 


PJM Electricity

Graph - PJM 12-Month Average Peak Power Price

On-Peak 1 Year Forward Price

 


Weather

Local Heating Degree Days*

 

Heating Degree Days** 

 

Oct-11

Nov- 11

Dec - 11

Jan - 12

Feb - 12

Mar- 12 

 Actual

212 

369

613

746

 

 Normal

205 

466

786

899

 

 Departure from Normal

3.4% 

20.8%

22%

17%

 

 

Colder

Warmer

Warmer

Warmer 

 

**Heating degree days are calculated by comparing the day’s average temperature to a 65 degree baseline. If the day’s average temperature is above 65, there are no heating degree days that day. If the day's average temperature is less than 65 degrees, subtract the average temperature from 65 to find the number of heating degree days for that day.