Volume 11, Issue 13 | March 29, 2013

Editor's Note

Prices Higher Than a Year Ago But Still Low Compared with Past 10 Years

Week in Review for March 22-29, 2013

For the fifth week in a row, energy prices inched upward. For this seven-day report period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) rose 1.6%. The 12-month average price for peak power on the PJM rose less than 1%.

Since March 1, 2013, natural gas prices increased by 11% and peak power prices on the PJM increased by 6%. Most analysts blamed cold weather for the March price rally. Preliminary data indicates that March was approximately 24% colder than normal in this region. This cold snap affected most areas east of the Mississippi and kept upward pressure on energy prices during the entire month.

However, this week's price increase was the smallest spike we've seen during the past four weeks. Hopefully, the price rally is coming to an end with the start of spring. With any luck, we will soon begin to experience some moderate spring days that do not require much heating or cooling.

Although natural gas and electric prices are trading higher than one year ago, energy prices are still near the second lowest level in 10 years.


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Natural Gas Fundamentals

Natural Gas Storage: Large Withdrawals Continue Shrinking the Gas Storage Bubble. Data Released March 28, 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 

1,781

1,876

-95

2,423

1,720

Storage Update: For the fifth week in a row, the U.S. Energy Information Administration (EIA) reported a larger than normal withdrawal from storage. We saw 95 Bcf come out of storage in this week's report. This was the largest withdrawal for this time period since 2006. Last year at this time, we saw an injection of 45 Bcf.

As a result, the gas bubble continued to shrink. We now have 26% less gas in storage than we did last year at this time. Even more concerning, the storage fields were only 3.5% above the five-year average. As you may recall, last year at this time the natural gas storage levels were 58% above the five-year average.

We will have much less gas in storage at the end of this heating season than we did a year ago. This means the demand for natural gas may be higher this summer than last summer as more gas will be needed to refill the storage facilities. This event could place more upward pressure on energy prices, especially if we have a hot summer.


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 22, 2013 was 418 rigs. This was an decrease of 13 rigs from the previous week. The count is 234 rigs lower than the count reported this same week last year. We are 56% below the five-year average gas rig count of 953.


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. 

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

Aug-12

$0.3010

Dec-12

$0.3696

April-13

$0.3976


NYMEX Values per Month for the Forward 12 Months

Thursday, March 28, 2013

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

May-13

$0.4024

Oct -13

$0.4128

Mar-14

$0.4335

June-13

$0.4066

Nov-13

$0.4196

April-14

$0.4081

July-13

$0.4113

Dec-13

$0.4341

12-month avg.

$0.4195

Aug-13

$0.4130

Jan-14

$0.4421

11/2013-03/2014

$0.43372

Sep-13

$0.4117

Feb-14

$0.4393

Crude Oil

$97/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.