Volume 10, Issue 30 | July 27, 2012

Power Sector Demand Puts Squeeze on the Gas Bubble

Week In Review For July 20-26, 2012

Week In Review For July 20-26, 2012

Although natural gas and electricity prices were relatively flat over the last two weeks, natural gas prices made a small move upward this week. For this seven-day report period, the 12-month average price for natural gas on the NYMEX rose 3.4% while the 12-month average price for peak power on the PJM remained flat.

This week's price increase in the natural gas market can be tied to the weather. When it gets hot, the air conditioners run at full speed. In order to meet this cooling demand, the power plants burn coal and natural gas to power the turbines that create our electricity. These demand spikes can place upward pressure on fossil fuels like natural gas.

Additionally, because natural gas is displacing coal as the fuel of choice for the power plants, less natural gas is available for injection into the storage fields. Although gas storage fields are still near record high levels for this time of year, the storage surplus is shrinking. For the thirteenth week in a row, the natural gas storage surplus shrunk. The natural gas storage surplus is now only 15.7% above the five year average. On May 3, 2012, the gas surplus was 55% above the five-year average.

Stay tuned. All eyes are on August. Will it be hot enough to eliminate the record gas surplus in the storage fields?

Natural Gas Storage - Gas Bubble Shrinks for 13th Week in a Row- Data Released July 26, 2012

Working gas in storage for the week ending July 20, 2012 was 3,189 Bcf.


 

 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

3,189

3,163

 26

2,702

2,754

Storage Update: For the thirteenth week in a row, the natural gas storage surplus shrunk. For this seven-day report period we saw an injection of only 26 Bcf. Last year at this time we saw an injection of 48 Bcf. The five-year average injection for this period was 61 Bcf. Although gas storage fields are still near record high levels for this time of year, the surplus continues to shrink. This week the natural gas surplus is now only 18% above last year's levels. The natural gas storage surplus is now only 15.7% above the five year average. On May 3, 2012, the gas surplus was 55% above the five year average.

Baker Hughes Rotary Rig Count For Natural Gas

Active U.S. gas rig count released by Baker Hughes for the week ending July 20, 2012 was 518 rigs.

Weekly Drilling Rig Update: The active U.S. gas rotary rig count released by Baker and Hughes for the week ending July 20, 2012 was 518 rigs. This was a decrease of 4 rigs from the previous week. The count is 371 rigs lower than the count reported this same week last year. We are 52% below the five-year average gas rig count of 1,071.

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. 

Aug-11

$0.4370

Dec-11

$0.3364

April-12

$0.2191

Sept-11

$0.3857

Jan-12

$0.3084

May-12 

$0.2036

Oct-11

$0.3759

Feb-12

$0.2678

June-12 

$0.2429

Nov-11

$0.3524

Mar-12

$0.2446

July-12

$0.2774

NYMEX Values Per Month For the Forward 12 Months

Thursday, July 26, 2012
Price per therm at the Henry Hub well-head

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

Aug-12

$0.3105

Jan-13

$0.3639

June-13

$0.3642

Sept-12

$0.3090

Feb-13

$0.3648

July-13

$0.3684

Oct-12

$0.3106

Mar-13

$0.3615

12-month avg.

$0.3458

Nov-12

$0.3262

April-13

$0.3583

11/12-3/13

$0.3536

Dec-12

$0.3516

May-13

$0.3605

Crude Oil

$89/barrel 

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

(Excludes Interstate Transportation)

 

Graph - PJM 12-Month Average Peak Power Price

On-Peak 1 Year Forward Price

Local Cooling Degree Days*

 

Cooling Degree Days** 

 

May - 12

June - 12

July - 12

Aug - 12

Sept - 12

Oct- 12 

 Actual

209

346

 

 Normal

108

314

 

 Departure from Normal

93.5%

10% 

 

Warmer

Warmer

 

**Cooling degree days are calculated by comparing the day’s average temperature to a 65 degree baseline.  If the day’s average temperature is below 65, there are no cooling degree days that day.  If the average temperature is greater than 65 degrees, then subtract 65 from the average temperature to find the number of cooling degree days.