Volume 12, Issue 8 | February 28, 2014

Editor's Note

That Was A Surprise.

Week in Review for Feb. 22-27, 2014

For this seven-day report period the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) fell 6% and the 12-month average price for peak power on the PJM fell 5%.

It was a nice surprise to see energy prices fall this week, but a one-time price drop does not constitute a trend. It is difficult to pinpoint one specific reason for this week's price decline. Perhaps it is due the fact that Spring, officially beginning March 20th, is right around the corner, bringing with it hope for warmer weather. Or, perhaps it was the bearish storage report released by the Energy Information Administration. This week's storage withdrawal was only 95 Bcf. As you may recall, the last four withdrawals were over 200 Bcf. This was the smallest withdrawal since the first week of December 2013. 

However, do not let this week's surprise price drop lull you into a sense of security. Because of the other huge withdrawals we saw this winter, the natural gas storage fields were still operating 34% below the five-year average and marked a 10 year low. 

If the unusually cold temperatures follow us into March, analysts fear that we may end the traditional winter heating season on March 31st with less than 1,000 Bcf of natural gas in the storage caverns. If these fears are realized, analysts wonder how difficult it will be to re-fill the caverns to the 3,800 Bcf level during the traditional summer re-fill season (The traditional refill season runs from  April 1st-October 31st). 

Here is the concern: If we have an unusually hot summer whereby the power plants need more natural gas than usual to fuel their electric turbines, and the gas industry is forced to inject more gas than usual into the storage caverns to get ready for next winter, we may see more upward pressure on energy prices this summer. 

As usual, weather has a huge impact on energy prices. If you want to protect your energy budget from the price volatility that will come with a hot summer, it may make sense to look at some early renewal options this Spring.


Spotlight on Clean Currents Commercial Accounts

Clean Currents Customers can look to WGES for renewable energy products

This month Clean Currents announced that it was unable to continue to provide electricity supply to its customers because it did not have the financial resources to handle the sharp spike in wholesale electricity prices caused by the extreme and prolonged cold weather in January.  Washington Gas Energy Services (WGES) is ready meet the renewable energy needs of former Clean Currents’ customers, without disruption in service.

WGES offers products with the same renewable content that was offered under Clean Currents’ contracts. For commercial customers, WGES offers wind power for any portion of a customer’s electricity supply or the option to supplement your existing electricity supply plan with our wind Renewable Energy Credits (RECs). Customers can choose either national or local wind farms as the source.

For more than 17 years, WGES has supplied retail energy to residential and commercial customers in the mid‐Atlantic region. More than 10 years ago, we began to offer sustainable energy options. Today, we are one of the largest suppliers of electricity and natural gas in the mid‐Atlantic region, and in our service area we are the most tenured and experienced supplier of sustainable energy options that include WGES CleanSteps® WindPower, WGES National WindPower WGES PA WindPower, WGES CleanSteps® Carbon Offsets and WGES PA Carbon Offsets.

Learn more about both wind power and carbon offsets at www.wges.com/commercialgreen or contact our Account Manager, Technical Sales, Richard Walsh, at richard.walsh@wges.com or by phone at 703-793-7533.

 

 

 


Natural Gas Fundamentals

Natural Gas Storage Update: Storages 40% Below Last Year's Level. Data Released Feb. 27, 2014

 

 

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 

1,348

1,443

-95

2,253

2,059

For this report period we finally saw a smaller than average withdrawal of only 95 Bcf.  As you may recall, the last four withdrawals were over 200 Bcf.

It was the smallest withdrawal since the first week of December 2013. This week's withdrawal was 42% smaller  than last year's withdrawal of 165 Bcf and 24% smaller than the five-year average withdrawal of 125 Bcf. 

Don't let this small withdrawal lull you into sense of security. Due to the other huge withdrawals we experienced  this winter, the natural gas storage fields were still 40% below last year's levels and 34% below the five-year average. Last year at this time, natural gas inventories were 16% above the five-year average.

If the storage deficit continues to grow in the month of March, it will be a challenge to replenish the caverns during the traditional refill season of April 1st to Oct 31st. If we have a hot summer where the power plants are burning more gas than usual, and we are injecting more gas than usual into the caverns, we may see upward pressure on energy prices during the summer months.


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 February 21, 2014 was 342 rigs. This was an increase of 5 rigs from the previous week. The count is 86 rigs lower than the count reported this same week last year. We are 56% below the five-year average gas rig count of 769.


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. 

April-13

$0.3976

Aug-13

$0.3459

Dec-13

$0.3818

May-13

$0.4152

Sept-13

$0.3567

Jan-14

$0.4407

June-13

$0.4148

Oct-13

$0.3498

Feb-14

$0.5557

July-13

$0.3707

Nov-13

$0.3497

Mar-14

$0.4855


NYMEX Values per Month for the Forward 12 Months

Thursday, February 27, 2014

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

April-14

$0.4511

Sept-14

$0.4493

Feb-15

$0.4698

May-14

$0.4474

Oct-14

$0.4505

Mar-15

$0.4576

June-14

$0.4495

Nov-14

$0.4553

12-month avg.

$0.4563

July-14

$0.4529

Dec-14

$0.4661

11/2014-3/2015

$0.46472

Aug-14

$0.4518

Jan-15

$0.4748

Crude Oil

$103/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 Degrees Day** 

 

Nov - 13

Dec 13

Jan - 14

Feb- 14

Mar - 14

April - 14

 Actual

  543 

 696

1008 

 

 

 

 Normal

 466

 786

899 

 

 

 

 Departure from Normal

 17%

 11%

         12% 

    

 

 

 Colder

 Warmer

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.