Volume 12, Issue 36 | October 3, 2014

Editor's Note

30 Days Left

Week in Review for September 26 - October 2, 2014

The month of September was uneventful and energy prices traded relatively flat. However, as we moved into October, the Bears immediately tried to push prices down and made some progress. For this seven-day report period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX)fell 2% closing at $0.388/therm while the 12-month average price for peak power on the PJM fell less than 1%.

The Bears tried to get everyone to focus on the natural gas storage report this week. This week's gas injection was 112 Bcf, a record high for September. While this injection was unusually large and did place some downward pressure on energy prices, the price drop was tempered by the fact that storage levels were  still 11% below the five-year average with five weeks left in the traditional re-fill season.

The Bears maintain that with over one month to go before the start of the unofficial heating season, and with the current minimal demand for heating and cooling, that we should be able to refill the caverns by November 1st. So where do prices go during the month of October?   

Perhaps we can use the month of September as a barometer. From September 2 to October 2, 2014, natural gas prices fell less than 1% while electricity prices rose 3%. If weather remains mild some analysts think we can expect  the same pricing results in October.

The big price swings are likely to hit after November 1st as winter weather has a huge impact on energy prices. If you can predict the weather then you can predict the short term direction of energy prices.

Here are two forecasts I just read: NOAA, for now, is forecasting a "fairly normal winter temperature wise" for the 2014-2015 winter season. Conversely, The Weather Centre forecast states that "if you put the pieces together, the climate pattern that made the winter so cold last year may very well return again this winter."

Weather is the wild card. If you want to protect your budget from the price spikes that come with a cold winter, this is a good time to look at your renewal strategy.


Natural Gas Fundamentals

Natural Gas Storage Update: Record Storage Injection

 

 

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 

3,100

2,988

112

3,473

3,499

Good news. We set an injection record this week. This week's injection was 112 Bcf which was a record high injection for September. This was also the 24th consecutive injection above the five-year average. This week's injection of 112 Bcf was 32% larger than the five-year average injection of 85 Bcf. 

The storyline remains the same. Record high shale gas production and low demand have created a larger-than-normal flow of gas into the storage fields. Natural gas inventories were 55% below the five-year average on April 3, 2014. However, storages are now only 11% below the five-year average. 

We have five more weeks left in the traditional injection season. We should be able to refill the caverns to 3,400 Bcf by November 1st. We need five more consecutive injections above 60 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 26, 2014 was 338 rigs. This was an increase of nine rigs from the previous week. The count is 38 rigs lower than the count reported this same week last year. We are 53% below the five-year average gas rig count of 722.


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. 

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

Feb-14

$0.5557

June-14

$0.4619

Oct-14

$0.3984


NYMEX Values per Month for the Forward 12 Months

Thursday, October 2, 2014

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

Nov-14

$0.3932

Apr-15

$0.3760

Sept-15

$0.3793

Dec-14

$0.4012

May-15

$0.3737

Oct-15

$0.3825

Jan-15

$0.4081

June-15

$0.3764

12-month avg.

$0.3881

Feb-15

$0.4070

July-15

$0.3793

11/2014-3/2015

$0.4040

Mar-15

$0.4000

Aug-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

274 

 

 Normal

 108

 314 

457 

406

202

 

 Departure from Normal

 37%

   18% 

         1%

2% 

35% 

 

 Warmer

 Warmer

Cooler 

Cooler

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.