Volume 12, Issue 33 | September 12, 2014

Editor's Note

That Was a Great Summer.

Week in Review for September 5-11, 2014

Last week, we reported that energy prices rose slightly in August but lost all of their gains during the first week of September. For this seven-day report period, the Bears and the Bulls had mixed results. The average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) closed nearly flat at  $0.386/therm while the 12-month average price for peak power on the PJM rose 2%.

Now that we are rolling into the "shoulder season," let's look at what happened this summer. Temperatures for July and August were mild this summer minimizing cooling demand. On top of that, natural gas production hit at an all-time high this summer.   

As a result of this low demand and high supply, the industry refilled the natural gas storage caverns at a record pace. Natural gas inventories were 55% below the five-year average on April 3, 2014 following an unusually cold winter. However, thanks to this mild summer, the natural as storage fields now sit only 14% below the five-year average.

The overall impact of this mild summer, from June 2, 2014 to Sept. 11, 2014, was that natural gas prices fell 14% and peak power prices on the PJM fell 9%.

So, where do prices go from here?  Will prices decline this fall? Many factors impact energy prices including weather, production, supply curtailments, pipeline and power plant maintenance, overseas tensions and inventory levels.

For now, all eyes are on inventory levels and weather. As we roll into the shoulder season of September and October, analysts expect to see minimal demand for either heating or cooling.  If this is the case, analyst are very confident that we can re-fill the caverns before the heating season arrives. 

If we get a couple of triple-digit injections over the next two weeks,  it may be a good time to lock-in your energy requirements. Don't be lulled to sleep. Winter predictions are on the way and will begin to impact prices.


Natural Gas Fundamentals

Natural Gas Storage Update: The Streak Continues

 

 

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 

2,801

2,709

92

3,244

3,264

This week's injection was 92 Bcf. which was larger than expected. This was the 21st consecutive injection that exceeded the five-year average. This week's injection of 92 Bcf was 53% larger than the five-year average injection of 60 Bcf. 

We continue to refill the caverns at a record pace because natural gas supplies are high and summer demand has been low. Natural gas inventories were 55% below the five-year average on April 3, 2014 following a long, cold winter. However, thanks to these unusually large injections, storages are now only 14% below the five-year average. 

We have eight more weeks left in the traditional injection season that ends Nov. 1st. Analysts are very confident that we can refill the caverns to 3,400 Bcf by Nov.1st. We need eight more consecutive injections above 75 Bcf to hit the target.


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 September 5, 2014 was 340 rigs. This was an increase of two rigs from the previous week. The count is 54 rigs lower than the count reported this same week last year. We are 53% below the five-year average gas rig count of 726.


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-13

$0.3498

Feb-14

$0.5557

June-14

$0.4619

Nov-13

$0.3497

Mar-14

$0.4855

July-14

$0.4400

Dec-13

$0.3818

Apr-14

$0.4584

Aug-14

$0.3808

Jan-14

$0.4407

May-14

$0.4795

Sept-14

$0.3957


NYMEX Values per Month for the Forward 12 Months

Thursday, September 11, 2014

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

Oct-14

$0.3823

Mar-15

$0.3960

Aug-15

$0.3815

Nov-14

$0.3873

Apr-15

$0.3763

Sept-15

$0.3804

Dec-14

$0.3959

May-15

$0.3749

12-month avg.

$0.3864

Jan-15

$0.4027

June-15

$0.3773

11/2014-3/2015

$0.3992

Feb-15

$0.4020

July-15

$0.3803

Crude Oil

$ 93/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

 372

453 

399

 

 

 Normal

 108

 314 

457 

406

 

 Departure from Normal

 37%

   18% 

         1%

2% 

 

 

 Warmer

 Warmer

Cooler 

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.