Volume 12, Issue 13 | April 4, 2014

Editor's Note

Storage, Storage, Storage

Week in Review for March 28 - April 3, 2014

For this seven-day report period, the average 12-month closing price for natural gas on the New York Mercantile Exchange (NYMEX) came in at $0.454/therm, a 1% decrease from last week. Meanwhile, the 12-month average price for peak power on the PJM rose 2% from the previous week's close. 

Energy prices were unable to sustain any big rallies this week as traders seemed to recognize that winter has finally come to and end.  In the energy business, April 1st marks the start of the Spring season which we commonly call  the "shoulder season".  During the shoulder season there is generally little demand for either heating or cooling. In other words, this is a low demand period for energy. This week the traders were apparently looking forward to Spring and this variable was enough to keep a lid on any big price rallies for now.

Where do energy prices go from here? This is a good time to reflect on this past, very cold winter. In this area, November 2013 was 17% colder than normal,  January 2014 was 12% colder than normal,  February was 4% colder than normal and March was 19% colder than normal. Additionally, according to the U.S. Energy Information Administration (EIA) and Bentek Energy, "total natural gas consumption in the Unites States rose to a record average of 90.6 billion cubic feet per day (Bcf/d) this winter."  

As a consequence of this very cold winter and the subsequent energy demand, the natural gas industry entered the Spring shoulder season with an unusually low storage position. The U.S. Energy Information Administration (EIA) just reported that working gas in storage as of March 28, 2014 was 822 Bcf which was 55% below the five-year average. This marks an eleven year low.   

The current concern is that an unusually hot summer could place upward pressure on energy prices. What happens if  natural gas demand spikes at the power plants this summer, while, concurrently, more gas is needed to replenish the storage fields? This double demand component could place upward pressure on energy prices during the summer. Stay tuned. You may want to consider early renewal options during the months of April and May to avoid the possibility of summer-heat price spikes.


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: Levels at 11 Year Low. Data Released April 3, 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 

822

896

-74

1,700

1,814

As the traditional winter withdrawal season ended,  the U.S. Energy Information Administration (EIA) reported yesterday that working gas in storage for the week ending March 28, 2014 was 822 Bcf. This marks an eleven-year low. The last time storage levels exited March at these record low levels was March 28, 2003 when levels hit  696 Bcf.

This week's withdrawal of 74 Bcf  was hopefully the last withdrawal of the winter heating season. Not surprisingly,  this week's withdrawal was, once again,  larger than the five-year average. The five-year average withdrawal for this time of year is 8 Bcf. 

Due to these larger-than-average withdrawals this winter, the natural gas storage fields are now 51% below last year's levels and 55% below the five-year average.  The need to re-fill these caverns during the summer months will create an additional demand component for natural gas which could  place upward pressure on energy prices during the summer.


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 March 28, 2014 was 318 rigs. This was a decrease of 8 rig from the previous week. The count is 71 rigs lower than the count reported this same week last year. We are 58% below the five-year average gas rig count of 758.


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. 

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

Aug-13

$0.3459

Dec-13

$0.3818

Apr-14

$0.4584


NYMEX Values per Month for the Forward 12 Months

Thursday, April 3, 2014

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

May-14

$0.4470

Oct-14

$0.4525

Mar-15

$0.4624

June-14

$0.4499

Nov-14

$0.4572

Apr-15

$0.4129

July-14

$0.4538

Dec-14

$0.4686

12-month avg.

$0.4549

Aug-14

$0.4537

Jan-15

$0.4767

11/2014-3/2015

$0.45862

Sept-14

$0.4513

Feb-15

$0.4725

Crude Oil

$100/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 

754

678 

 

 Normal

 466

 786

899 

728 

568 

 

 Departure from Normal

 17%

 11%

         12% 

 4%

 20% 

 

 Colder

 Warmer

Colder 

Colder 

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.