Volume 12, Issue 44 | December 19, 2014

Editor's Note

Guess Who Arrives This Sunday?

Weeks in Review for December 12 - December 18, 2014

For this seven-day report period, the average 12-month price for natural gas on NYMEX fell less than 1% closing at $0.354/therm. Conversely, the 12-month average price for peak power on the PJM actually rose 3%. 

This was the second week in a row that we experienced a minimal run on both natural gas and electricity prices. Both commodities have been trading in tight range over the last two weeks. Apparently everyone is waiting to see if we will have a cold, warm or normal winter. 

Stay tuned. Winter officially begins Sunday, December 21, 2104 at 6:03 pm. According to NOAA, the extended forecast for the period of December 24, 2014 to January 1, 2015 is colder than normal east of the Mississippi.

Besides the weather, below are two other variables we should continue to monitor.

On the natural gas storage side, the last three gas withdrawals were smaller than normal which helped reduce the storage deficit that resulted from last year's brutally cold temperatures. After this week's small withdrawal, the storage fields were only 7.3% below the five-year average. If we can erase the storage deficit, we may see some downward pressure on prices.   

The second variable to watch is the fuel mix used at the power plants within the Unites States. At the end of 2013, according to EIA, coal produced 39% of our electricity, natural gas produced 27%, nuclear produced 19%, hydro- power produced 7% and renewable energy accounted for 6% of the electricity produced in our country. Big changes are on the horizon for the power plants however and according to a recent article in Gas Daily, "another major change in the power market in 2015 will be the retirement of a large number of coal-fired power plants. Bentek is tracking a total of 14,834 MW of coal retirements planned for 2015 which accounts for 80% of all planned retirements in the US for the year, and approximately 4.5% of the total currently operating coal capacity."

As coal plants are retired, more and more power plants will need natural gas and renewables like wind and solar to produce their electricity and replace the coal. As more coal plants are retired, we may see more volatility in both natural gas and electricity prices during unusually cold winters or unusually hot summers.

There are many variables that impact energy prices but for now, all eyes are focused on the pending weather for January, 2015. 


Renewable Energy

WGES Recognized with EPA Green Power Leadership Award

WGES Recognized with EPA Green Power Leadership Award

Washington Gas Energy Services (WGES) has received a 2014 Green Power Leadership Award from the U.S. Environmental Protection Agency (EPA). The annual awards recognize the country’s leading green power suppliers for efforts to grow and advance the nation’s voluntary green power market.

“EPA is pleased to recognize Washington Gas Energy Services with a Green Power Supplier of the Year award for its leadership in expanding the nation’s renewable energy industry,” said EPA Administrator Gina McCarthy. “Through its support and development of new renewable energy capacity, Washington Gas Energy Services is helping to address climate change and put our country on a path to a future powered by renewable resources.”


WGES has been a green power leader since 2002, when we supported one of the first wind farms in the PJM grid. Today, WGES maintains its leadership by working to provide green power throughout the mid-Atlantic region, and offers a suite of Green‐e Energy certified local and national wind power products: WGES CleanSteps® WindPower, WGES PA WindPower and WGES National WindPower. All of our standard electricity offerings to residential customers include 5 percent wind power, above and beyond what is mandated by RPS. Since 2003, WGES customers have purchased approximately 4 billion kWh of wind power. WGES customers can also opt to green their entire energy supply by choosing wind power and carbon offsets. To learn more about our green products, visit www.wges.com/commercialgreen


"Since 2002, Washington Gas Energy Services has been able to offer customers a growing and diverse portfolio of innovative clean energy options," said Laura Pagliarulo, manager, green products, for WGES. "We are honored to receive this award from the U.S. Environmental Protection Agency, and look forward to upholding our role as a leader in the industry by continuing to provide our commercial and residential customers with efficient, green electricity and natural gas options."


Natural Gas Fundamentals

Natural Gas Storage Update: Three In A Row

 

 

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 

3,295

3,359

-64

3,289

3,553

The slow start to the winter withdrawal season continued this week. According to the Energy Information Administration, this week's withdrawal was only 64 Bcf.  

This was the third consecutive withdrawal that fell below historical averages. The week's withdrawal was 59% smaller than the five-year average withdrawal of 157 Bcf and was tiny compared to last year's record withdrawal of  256 Bcf.

Thanks to the moderate temperatures we have enjoyed in December and the record high natural gas production coming from the shale formations, we have reduced the storage deficit that resulted from last year's brutally cold temperatures. After this week's small withdrawal, the storage fields were only 7.3% below the five-year average. 


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 December 12, 2014 was 346 rigs. There was an increase of 2 rigs from the previous week. The count is 23 rigs lower than the count reported this same week last year. We are 51% below the five-year average gas rig count of 709.


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. 

Jan-14

$0.4407

May-14

$0.4795

Sept-14

$0.3957

Feb-14

$0.5557

June-14

$0.4619

Oct-14

$0.3984

Mar-14

$0.4855

July-14

$0.4400

Nov-14

$0.3728

Apr-14

$0.4584

Aug-14

$0.3808

Dec-14

$0.4282


NYMEX Values per Month for the Forward 12 Months

Thursday, December 18, 2014

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

Jan-15

$0.3642

June-15

$0.3444

Nov-15

$0.3591

Feb-15

$0.3676

July-15

$0.3482

Dec-15

$0.3768

Mar-15

$0.3627

Aug-15

$0.3489

12-month avg.

$0.3544

Apr-15

$0.3419

Sept-15

$0.3472

11/2014-3/2015

$0.3648

May-15

$0.3414

Oct-15

$0.3501

Crude Oil

$ 55/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 - 14

Dec - 14

Jan - 14

Feb - 14

Mar - 14

April - 14

 Actual

  505

 

 

 

 

 

 Normal

 466

 

 

 

 

 

 Departure from Normal

8%

  

    

 

 

 

 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.