Volume 11, Issue 11 | March 15, 2013

Editor's Note

Prices Increase for the Third Week in a Row

Week in Review for March 8-14, 2013

For the third week in a row energy prices inched upward. The average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) rose 4.4% and the 12-month average price for peak power on the PJM rose 2.3 %. Since the start of the month, natural gas prices have increased by 7% and electricity prices have increased by 4% on the PJM grid.

Analysts seem to agree that reaction to the recent storage report, as well as the recent cold snap, have both kept upward pressure on energy prices during the last two weeks. Many analysts have focused on reports showing that the natural gas storage bubble has shrunk, and that the weather has been colder than normal.

On the natural gas storage front, the U.S. Energy Information Administration (EIA) reported a larger-than-expected gas withdrawal for the third week in a row. These above average withdrawals have shrunk the gas bubble. To date, we have 18.5% less gas in storage than we did one year ago. The report also showed that storage fields are now only 11.4% above the five-year average. As you may recall, last year at this time the natural gas storage levels were 51% above the five-year average.

With regard to the weather, the past two weeks were cold. Additionally, the 8-14 day forecast released from the National Oceanic and Atmospheric Administration (NOAA) indicated that temperatures east of the Mississippi will be colder than normal during the period of March 20-28, 2013. Colder weather, of course, increases heating demand and tends to place upward pressure on energy prices.

The big question now is whether or not these gains are sustainable. The bulls may win a few more fights during  the next few months if production remains flat, as it has over the last 12 months, and if demand increases as more power plants, chemical plants and other various industrial users switch to low-priced natural gas,.


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Natural Gas Fundamentals

Natural Gas Storage: Another Larger Than Normal Withdrawal. Data Released March 14, 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 

1,938

2,083

-145

2,378

1,740

Storage Update: For the third week in a row, the U.S. Energy Information Administration (EIA) reported a larger than expected withdrawal from storage. We saw 145 Bcf come out of storage this week. Last year at this time, we saw a withdrawal of 66 Bcf. The five-year average withdrawal for this time period was 74 Bcf.

The gas bubble continues to shrink. To date, we have 18.5 % less gas in storage than we did last year at this time. It appears that we will have much less gas in storage at the end of this heating season than we did a year ago. The traditional heating season ends March 31.

The good news is that the gas bubble has not completely disappeared. The storage fields are still 11.4% above the five-year average, but this number is also shrinking. As you may recall, last year at this time the natural gas storage levels were 51% above the five-year average.

The shrinking gas bubble may be a sign that supply and demand are tightening,


Rig Count for Natural Gas

Weekly Drilling Rig Update: The active U.S. gas rotary rig count for natural gas released by Baker and Hughes for the week ending March 8, 2013 was 407 rigs. This was a decrease of thirteen rigs from the previous week. The count is 263 rigs lower than the count reported this same week last year. We are 58% below the five-year average gas rig count of 960.


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. 

April-12

$0.2191

Aug-12

$0.3010

Dec-12

$0.3696

May-12

$0.2036

Sept-12

$0.2634

Jan-13 

$0.3354

June-12

$0.2429

Oct-12

$0.3023

Feb--13

$0.3226

July-12

$0.2774

Nov-12

$0.3471

Mar-13

$0.3427


NYMEX Values per Month for the Forward 12 Months

Thursday, March 14, 2013

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

April-13

$0.3812

Sep -13

$0.3942

Feb-14

$0.4243

May-13

$0.3848

Oct-13

$0.3957

Mar-14

$0.4184

June-13

$0.3887

Nov-13

$0.4029

12-month avg.

$0.4020

July-13

$0.3933

Dec-13

$0.4188

11/2013-03/2014

$0.41822

Aug-13

$0.3947

Jan-14

$0.4267

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

759

722

 

 Normal

466

786

899

704

 

 Departure from Normal

17%

23% 

16% 

3% 

 

 

Colder

Warmer

Warmer

 Cooler

 

**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.