Volume 11, Issue 19 | May 10, 2013

Editor's Note

Was This The Calm Before The Storm? A Boring and Uneventful Week.

Week in Review for May 3 - May 9, 2013

Even though it was a relatively uneventful news week for natural gas and electricity, we still saw a small price decrease for the third week in a row. During this seven-day report period the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) fell 1.4 %. The 12-month average price for peak power on the PJM fell by less than 1%.

After the price rally from March we revel in any price decline that comes our way. This was only the fourth time in eleven weeks that we experienced a downward move. The one news story that kept some downward pressure on energy prices this week was from the Energy Information Administration's weekly storage report. According to EIA, we saw our first above average injection of the refill season. This week's injection was 88 Bcf which was the largest injection of the re-fill season.  

However, we will need many more above-average injections if we hope to keep a lid on prices. As you know, the gas bubble from a year ago has disappeared. The natural storage levels were 5% below the five-year average and 28% below last year's levels.

At the risk of being redundant, the next wild card to watch is the summer weather. If we have a hot summer and natural gas is directed to the power plants instead of the storage fields, we may see more upward pressure on both natural gas and electricity prices. Hot weather is a big wild card because more and more power plants are switching from coal to natural gas. 


Natural Gas Fundamentals

Natural Gas Storage: First Above Average Injection of The Season. Data Released May 9, 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 

1,865

1,777

+88

2,602

1,964

Storage Update:  Good news. We finally saw our first above-average injection of  the refill season. This week's injection was 88 Bcf which was also the largest injection of the season. The traditional injection season runs from April 1st to October 31st.

Last year at this time we saw an injection of 30 Bcf. The five-year average injection for this time period was 69 Bcf. Thanks to this larger-than-normal injection we were able to cut into the storage deficit. 

However, we will need many more above-average injections if we hope to eliminate the current deficit. As you know, the gas bubble from a year ago evaporated thanks to the prolonged heating season. For now, the natural storage levels are 5% below the five-year average and  28% below last year's levels.

If we experience an unusually hot summer, and natural gas is pumped to the power plants instead of the storage fields, the likelihood of another price rally increases.


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 May 3, 2013 was 354 rigs. This was a decrease of 12 rigs from the previous week. The count is 252 rigs lower than the count reported this same week last year. We are 62% below the five-year average gas rig count of 931.


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. 

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

Sept-12

$0.2634

Jan-13

$0.3354

May-13

$0.4152


NYMEX Values per Month for the Forward 12 Months

Thursday, May 9, 2013

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

June-13

$0.3983

Nov -13

$0.4168

April-14

$0.4106

July-13

$0.4033

Dec-13

$0.4338

May-14

$0.4103

Aug-13

$0.4058

Jan-14

$0.4424

12-month avg.

$0.4174

Sep-13

$0.4060

Feb-14

$0.4400

11/2013-03/2014

$0.43332

Oct-13

$0.4083

Mar-14

$0.4336

Crude Oil

$95/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

651

217 

 Normal

466

786

899

704

568

270 

 Departure from Normal

17%

23% 

16% 

3% 

15% 

20% 

Colder

Warmer

Warmer

 Cooler

Cooler

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.