Volume 11, Issue 2 | January 11, 2013

Editor's Note

Stalemate in Energy Prices

Review for January 4 - 10, 2013

The Bulls and the Bears wrestled to a tie this week as one news story placed upward pressure on energy prices while another headline placed downward pressure on prices. For this seven-day report period the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) rose less than 1% and the 12-month average price for peak power on the PJM fell by less than 1%.

Early in the week energy prices dropped because of warmer-than-normal temperatures in most of the country. At that point, it looked like we were going to experience a second consecutive week of falling prices.

However, yesterday (Thursday, January 10) energy prices rose as the Energy Information Administration (EIA) reported a larger-than-expected natural gas withdrawal from storage. EIA reported a withdrawal of 201 Bcf, which was the largest withdrawal since February 2011. As a result of this news, the year-to-year surplus dropped to a deficit. Storages are now 2.6% below last year's levels.

Weather, of course, is a big variable that impacts energy prices. While December 2012 was the 10th warmest December on record, it is too early to tell what type of winter we will experience. We are only halfway through the traditional heating season, which runs from November 1 to March 31.

The updated weather forecast from the National Oceanic and Atmospheric Administration (NOAA) is calling for colder-than-normal temperatures east of the Mississippi next week. Cold weather tends to place upward pressure on energy prices. Stay tuned.


Natural Gas Fundamentals

Natural Gas Storage: Largest Withdrawal In More Than 20 Months. Data Released Jan. 10, 2013

 

 

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 

3,316

3,517

-201

3,404

2,996

Storage Update: The Energy Information Administration (EIA) reported another larger-than-expected withdrawal this week. We saw a large withdrawal of 201 Bcf, which was the largest withdrawal since February 2011.

Last year at this time we saw a withdrawal of 95 Bcf. The five-year average withdrawal for this time of year is 149 Bcf. As a result of last week's larger-than-expected withdrawal, the year-to-year surplus is now a deficit. Storages are now 2.6% below last years' levels. The five-year storage surplus fell from 12.4% above the five-year average to 10.7% above the five-year average.

This large withdrawal was attributed to the fact that the first week of January 2013 was colder than normal. Additionally, analysts point out that more and more power plants are switching from coal to natural gas which is driving up natural gas demand during the peak heating and cooling months.


Rig Count For Natural Gas

Weekly Drilling Rig Update: The active U.S. gas rotary rig count released by Baker and Hughes for the week ending January 4, 2013 was 439 rigs. This was a increase of eight rigs from the previous week. The count is 372 rigs lower than the count reported this same week last year. We are 56% below the five-year average gas rig count of 987.


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. 

Feb-12

$0.2678

June-12

$0.2429

Oct-12

$0.3023

Mar-12

$0.2446

July-12

$0.2774

Nov-12 

$0.3471

April-12

$0.2191

Aug-12

$0.3010

Dec-12 

$0.3696

May-12

$0.2036

Sept-12

$0.2634

Jan-13

$0.3354


NYMEX Values Per Month For the Forward 12 Months

Thursday, January 10, 2013

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

Feb-13

$0.3193

July -13

$0.3436

Dec-13

$0.3840

Mar-13

$0.3208

Aug-13

$0.3465

Jan-14

$0.3950

April-13

$0.3257

Sep-13

$0.3478

12-month avg.

$0.3471

May-13

$0.3315

Oct-13

$0.3510

11/12-3/13

$0.32005

June-13

$0.3376

Nov-13

$0.3629

Crude Oil

$93/barrel 


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

(Excludes Interstate Transportation)


PJM Electricity

PJM Graph for Electricity - 12 Month Average Peak Power Price

On-Peak 1 Year Forward Price


Weather

Local Heating Degree Days*

 

Heating Degree Days** 

 

Nov - 12

Dec - 12

Jan - 13

Feb - 13

Mar - 13

April- 13 

 Actual

543

603

 

 Normal

466

786

 

 Departure from Normal

17%

23% 

 

 

 

 

Colder

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.