Volume 11, Issue 48 | December 13, 2013

Editor's Note

The Heat is on and Energy Prices Continue to Rise

One Week Review for December 6 -12, 2013

Cold temperatures in most of the country are keeping upward pressure on energy prices. For the fifth week in a row, energy prices rose. For this seven day report period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) rose 4% and the 12-month average price for peak power on the PJM rose 1.9%.

Since November 8, 2013 natural gas prices on NYMEX have risen 16.5% and electricity prices on the PJM have risen 4.4 %. Analysts blame the price increases on the arrival of unseasonably cold temperatures. As you may recall, November was 17% colder than normal, and December temperatures so far seem to be continuing that trend.

These unusually cold temperatures are creating havoc for natural gas production all over the country. In fact, according to the Energy Information Administration (EIA), "U.S. gas production decreased 3.3% this week following well-freeze-offs. Wide-spread freeze-offs occurred in the Piceance Basin in Utah and Wyoming, the Uinta Basin in Utah, the San Joaquin Basin in California, and the Williston Basin in North Dakota." The closing of these gas wells placed additional upward pressure on energy prices this week.

Stay tuned. Weather is, undoubtedly, the main factor driving prices for the next few months.


Natural Gas Fundamentals

Natural Gas Storage Update: Another Above Average Withdrawal. Data Released Dec. 12, 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 

3,533

3,614

-81

3,806

3,642

This week's withdrawal of 81 Bcf was just half of last week's record withdrawal of 162 Bcf. However, this week's withdrawal was still 6.5% above the five-year average of 65 Bcf.

As you may recall, we entered the heating season on November 1st with inventories 1.5% above the five-year average. The cold November and December temperatures have started  to erode the gas bubble. Last week, natural gas inventories were 2.8% below the five-year average. Storages ended this week 3% below the five-year average. A growing deficit will keep upward pressure on energy prices. Stay tuned. Analysts are expecting a big withdrawal in next week's report.


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 December 6, 2013 was 375 rigs. This was an increase of eight rigs from the previous week. The count is 42 rigs lower than the count reported this same week last year. We are 54% below the five-year average gas rig count of 807.


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. 

Jan-13

$0.3354

May-13

$0.4152

Sept-13

$0.3567

Feb-13

$0.3226

June-13

$0.4148

Oct-13

$0.3498

Mar-13

$0.3427

July-13

$0.3707

Nov-13

$0.3497

April-13

$0.3976

Aug-13

$0.3459

Dec-13

$0.3818


NYMEX Values per Month for the Forward 12 Months

Thursday, December 12, 2013

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

Jan-14

$0.4409

June-14

$0.4182

Nov-14

$0.4270

Feb-14

$0.4401

July-14

$0.4207

Dec-14

$0.4387

Mar-14

$0.4363

Aug-14

$0.4218

12-month avg.

$0.4267

April-14

$0.4170

Sept-14

$0.4205

11/2013-3/2014

$0.43910

May-14

$0.4166

Oct-14

$0.4223

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

Winter Heating Season Update

This Winter Heating Season Update was prepared by Washington Gas Energy Services for our commercial customers with interruptible gas accounts. In order to help you manage your energy budget during the winter heating season that runs from November 1, 2013 through March 31, 2014, WGES will provide you with monthly updates containing information on Heating Degree Days (HDDs) and their potential impact on your natural gas usage.

HDDs are an indicator of the demand for natural gas used to heat buildings. Winters with colder than normal temperatures will have a higher number of cumulative HDDs and will typically require more natural gas for heating. Winters with warmer than normal temperatures will have a lower number of cumulative HDDs and will typically require less natural gas for heating.

The chart below shows the actual HDDs for November relative to the HDDs you can expect for a normal month and winter heating season. As you can see, temperatures were colder than normal for November, particularly during the last week of the month.

Chart: Winter Cummulative HDDs

Our Recommendation:

No action is required by you at the present time. Washington Gas Energy Services will continue to monitor winter heating season HDDs and will keep you informed of any developments that might impact your energy budget.


Local Heating Degree Days*

 
 
 

Heating Degrees Day** 

 

Nov - 13

Dec 13

Jan - 14

Feb- 14

Mar - 14

April - 14

 Actual

  543 

 

 

 

 

 

 Normal

 466

 

 

 

 

 

 Departure from Normal

 17%

 

 

    

 

 

 Colder

 

 

 

 

 

**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.