Volume 11, Issue 30 | August 2, 2013

Editor's Note

Mild Weather is Your Friend

Week in Review for July 26-August 1, 2013

At the risk of sounding redundant, weather can be your best friend or your worst enemy in the energy sector. For most of this summer, the weather has been our friend as mild temperatures have kept a lid on energy prices.

For this seven-day report period, the weather placed downward pressure on energy prices. This was the second report period in a row in which prices fell. This week, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) fell 4.1% and the 12-month average price for peak power on the PJM fell 3%.

The likely reason for this week's price decline was, once again, the weather. The National Oceanic and Atmospheric Administration's (NOAA) 8-14 day forecast called for below normal temperatures east of the Mississippi for the first two weeks of August.

When most of the country experiences mild summer temperatures, natural gas supplies can be directed to the storage fields instead of the power plants. Full storage fields make it more difficult for the Bulls to run up energy prices. For now, natural gas inventories are only 1.2% below the five-year average.

If mild temperatures persist, perhaps we can head into the winter heating season with a surplus and low prices. However, don't be lulled to sleep. The traditional injection season runs from April 1 to October 31. We still have three months left in the injection season.


Natural Gas Fundamentals

Natural Gas Storage: Déjà Vu. Data Released August 1, 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 

2,845

2,786

+59

3,213

2,879

Storage Update: This week's injection of 59 Bcf, as reported by the Energy Information Administration (EIA), was larger than expected. This week's injection of 59 Bcf more than doubled last year's injection of 28 Bcf and was 25% greater than the five-year average of 47 Bcf.

The traditional injection season runs from April 1 to October 31, so we have three months left in the injection season. To date, almost every injection has been above average except for two below average injections in mid-July. As you may recall, the weather from July 5-19 was hot and natural gas supplies were directed to the power plants instead of the storage fields.

Natural gas inventories ended the week 11.5 % below last year's levels and 1.2% below the five-year average. If mild temperatures persist, perhaps we can head into the winter heating season with a surplus.


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 July 26, 2013 was 369 rigs. There was no change from the previous week. The count is 136 rigs lower than the count reported this same week last year. We are 58% below the five-year average gas rig count of 884.


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. 

Sept-12

$0.2634

Jan-13

$0.3354

May-13

$0.4152

Oct-12

$0.3023

Feb-13

$0.3226

June-13 

$0.4148

Nov-12

$0.3471

Mar-13

$0.3427

July-13

$0.3707

Dec-12

$0.3696

April-13

$0.3976

Aug-13

$0.3459


NYMEX Values per Month for the Forward 12 Months

Thursday, August 1, 2013

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

Sept-13

$0.3387

Feb-14

$0.3803

July-14

$0.3810

Oct-13

$0.3415

Mar-14

$0.3774

Aug-14

$0.3828

Nov-13

$0.3524

April-14

$0.3725

12-month avg.

$0.369

Dec-13

$0.3707

May-14

$0.3743

11/2013-03/2014

$0.37212

Jan-14

$0.3798

June-14

$0.3776

Crude Oil

$107/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 Cooling Degree Days*


 

Cooling Degrees Day** 

 

May - 13

July - 13

July - 13

Aug - 13

Sept - 13

Oct- 13 

 Actual

144

351 

       511


 Normal

108

314

       457


 Departure from Normal

33%

12%

       12%

 

 

Warmer

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.