Volume 11, Issue 35 | September 6, 2013

Editor's Note

Which Way Do Prices Go From Here?

Week in Review for August 30 - September 5, 2013

For the second week in a row energy prices have closed relatively flat. During this week's seven-day report period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) fell 1% and the 12-month average price for peak power on the PJM was nearly identical to last week's closing price.

We were concerned that energy prices would try to stage a rally this week as National Oceanic and Atmospheric Administration (NOAA) forecast the return of hot weather to most of the country during September 11-19. However, the rally never happened.

It may indeed be difficult for energy prices to sustain any major price rally during the next few weeks because the summer cooling season, for all practical purposes, is over. The official start of autumn is September 22.

Additionally, it is hard for energy prices to stage a late summer price rally when the natural gas production numbers are so high. Natural gas production numbers are at an all-time high despite the fact that the active rig count for natural gas is 56% below the five-year average. These record high production levels can be attributed largely to the expansion of horizontal drilling programs and other such techniques in shale formations.

According to the Energy Information Administration (EIA), the U.S. natural gas marketed production was 25,319 Bcf in 2012. That was the equivalent of 253,190,000,000 therms. The last time production numbers were near these record levels was between the years of 1970-1977.

Which way do prices go from here? The upcoming hurricane season and winter temperatures will likely influence the short term direction of energy prices. For now, we are happy to say that supplies are high, demand is low and prices are trading near their second lowest level in nine years.


Spotlight on Carbon Offsets

Washington Gas Energy Services to Offset Carbon Impact of RETECH Conference Next Week

RETECH 2013This year’s RETECH Conference, September 9-11, will be entirely carbon neutral thanks to the sponsorship of Washington Gas Energy Services. Our WGES CleanSteps® Carbon Offsets product will be used to counterbalance the carbon impact from attendee travel to Washington, D.C., as well as energy use from hotel rooms and the conference itself. This effort will offset the emissions of more than 426,000 pounds of carbon dioxide, which is equivalent to avoiding the consumption of over 21,000 gallons of gasoline.

WGES CleanSteps® Carbon Offsets support independently verified carbon-reduction projects in the areas of transportation and landfill gas. Through our partnership with the Chesapeake Bay Foundation, a portion of all offset purchases supports the Carbon Reduction Fund, which is used to develop clean air and water projects throughout the Chesapeake Bay region.

All Washington Gas Energy Services standard natural gas includes a baseline 5 percent match of carbon offsets to natural gas use for residential customers and a 3.5 percent match for small commercial customers. Both residential and small commercial customers can choose natural gas matched with 100 percent WGES CleanSteps® Carbon Offsets. Large commercial customers have the option to customize the percent of their natural gas that is matched with carbon offsets.

To learn more about our Large Commercial Service for WGES CleanSteps® Carbon Offsets, or to make your event carbon neutral, visit our website, or consult with your Account Manager.


Natural Gas Fundamentals

Natural Gas Storage: Levels Are 1.5% Above Five Year Average. Data Released September 5, 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 

3,188

3,130

+58

3,398

3,145

This week's reported injection was 58 Bcf.  Although this week's injection was much larger than last year's injection of 33 BCf, the injection was in line with the five-year average of 60 Bcf.

Thanks to the cooler than normal temperatures during the month of August, the natural gas injections were above average for most of the month. Most of the injections were above average because gas supplies were directed to the storage fields instead of to the power plants .

As a result, we now have a respectable amount of gas in the storage fields. Storage levels were 1.4% above the five-year average. According to the Energy Information Administration, "predicted storage gas will still reach 3,800 Bcf by the end of the traditional refill season October 31. Demonstrated peak storage capacity is 4,265 Bcf."  We should have plenty of gas in storage as we enter the heating season.


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 August 30, 2013 was 380 rigs. This was a decrease of seven rigs from the previous week. The count is 93 rigs lower than the count reported this same week last year. We are 56% below the five-year average gas rig count of 864.


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. 

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

Jan-13

$0.3354

May-13

$0.4152

Sept-13

$0.3567


NYMEX Values per Month for the Forward 12 Months

Thursday, September 5, 2013

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

Oct-13

$0.3575

Mar-14

$0.3877

Aug-14

$0.3904

Nov-13

$0.3666

April-14

$0.3809

Sept-14

$0.3904

Dec-13

$0.3830

May-14

$0.3827

12-month avg.

$0.3830

Jan-14

$0.3912

June-14

$0.3855

11/2013-03/2014

$0.38394

Feb-14

$0.3912

July-14

$0.3887

Crude Oil

$108/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

June - 13

July - 13

Aug - 13

Sept - 13

Oct- 13 

 Actual

 144

351 

511

383


 


 

 Normal

108

314 

457

406


 


 

 Departure from Normal

33%

12%

   12% 

6%

 

 

Warmer

Warmer 

Warmer

Cooler 

 

 

****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.