Volume 12, Issue 21 | June 6, 2014

Editor's Note

Spring Was Your Friend But Summer Is On The Way

Week in Review for May 30 - June 5, 2014

For this seven day period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX)increased 2% closing at $0.456/therm, while the 12-month average price for peak power on the PJM fell 1%.

As you can see from the pricing graphs included in this newsletter, both natural gas and electricity prices have been trading in a relatively tight range over the last five weeks. Prices decreased a couple weeks in a row then increased a couple of weeks in a row. However, since May 2, 2014 the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) has decreased by 2% and the 12-month average price for peak power on the PJM has decreased by 3%.  

Spring is almost over and we are happy to exit spring with a price decrease. However, analysts are very worried about the upcoming months. The first day of summer arrives on June 21, 2014.

Although the spring weather was uneventful and generally kind  with regard to prices, summer poses all sorts of threats to energy prices. The first concern is that we are still dealing with a very large storage deficit. The natural gas storage fields are 37% below the five-year average. 

We have a long way to go to refill the caverns to 3,400 Bcf by November 1st. We need 23 consecutive injections above 82 Bcf if we want to overcome the deficit created by this past winter's huge heating demand. If we have a hot summer and natural gas is directed to the power plants instead of the storage fields, it may be difficult to reach a respectable storage level by Nov. 1. If we don't minimize the storage deficit in the next few months, we  could see upward pressure on energy prices.

The other summer threat to watch is the hurricane season. Sunday, June 1, 2014 marked the official start  of the hurricane season. Luckily, the National Oceanic and Atmospheric Administrations "predicts a relatively inactive June-November hurricane season this year."

So where do we go from here? For now it seems the answer is still highly dependent on the summer weather. If you can lock-in a rate now that is close to last year's rate, you may want to consider the early renewal option.


Natural Gas Fundamentals

Natural Gas Storage Update: A Long Way To Go. Data Released June 5, 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 

1,499

1,380

119

2,236

2,395

This week's injection was 119 Bcf  which was the fourth straight triple-digit injection of the season. Although this injection was 16% larger than the five-year average injection of 93 Bcf, analysts were not impressed. Analysts hoped to see record injections this Spring because they were worried that the upcoming injections may decrease dramatically once the summer temperatures hit the country.

We have a long way to go to refill the caverns to 3,400 Bcf by November 1st. In fact, we need  23  more consecutive injections above 82 Bcf if we want to overcome the deficit created by this past Winter's huge heating demand.

We are still dealing with a very large storage deficit. The natural gas storage fields are 33% below last year's levels and 37% below the five-year average. 

If we have a hot summer and natural gas is directed to the power plants instead of the storage fields, it will be difficult to hit the 82 Bcf per week target. If we don't  minimize the storage deficit in the next few months, we  could see upward pressure on energy prices.


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 May 30, 2014 was 326 rigs. This was an increase of 1 rig from the previous week. The count is 28 rigs lower than the count reported this same week last year. We are 56% below the five-year average gas rig count of 744.


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. 

July-13

$0.3707

Nov-13

$0.3497

Mar-14

$0.4855

Aug-13

$0.3459

Dec-13

$0.3818

Apr-14

$0.4584

Sept-13

$0.3567

Jan--14

$0.4407

May--14

$0.4795

Oct-13

$0.3498

Feb-14

$0.5557

June-14

$0.4619


NYMEX Values per Month for the Forward 12 Months

Thursday, June 5, 2014

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

July-14

$0.4701

Dec-14

$0.4752

May-15

$0.4136

Aug-14

$0.4686

Jan-15

$0.4806

June-15

$0.4152

Sept-14

$0.4657

Feb-15

$0.4767

12-month avg.

$0.4567

Oct-14

$0.4645

Mar-15

$0.4659

11/2014-3/2015

$0.4732

Nov-14

$0.4675

Apr-15

$0.4173

Crude Oil

$102/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 - 14

June 14

July - 14

Aug- 14

Sept- 14

Oct - 14

 Actual

  148

 

 

 

 

 Normal

 108

 

 

 

 Departure from Normal

 37%

 

         

 

 

 

 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.