January 24, 2012

Natural Gas Touches 10-Year Low.

Yesterday's price decline in early trading for natural gas to $2.231 was the second time within five days that natural gas touched a ten year low of $2.31 recorded in March of 2002. NOAA's weather forecast, which predicted a warmer than average February discouraged traders who were hoping for a hard, cold February, which is almost always a sure bet in North America. At 8:15 this morning, natural gas recovered from the low and is up $0.177 to $2.52 per mmbtu for the front month on NYMEX. The price increase yesterday was apparently in response to Chesapeake Energy's production cutbacks.

Natural Gas Futures Prices

CME-NYMEX natural gas futures market intraday prices for January 23, 2012 at 8:15 AM.
(Prices are USD per mmbtu)

Feb. $2.540 +$0.015
Mar. $2.584 +$0.004
Apr. $2.720 +$0.018
May. $2.815 +$0.019
Jun. $2.902 +$0.018
Jul.  $2.961 +$0.016

PMC 30-Day Natural Gas Futures Chart

Natural Gas Storage is 566 BCF Above Five-Year Average

Working gas in storage was 3,290 Bcf as of Friday, January 13, 2012, according to EIA estimates. This represents a net decline of 87 Bcf from the previous week. Stocks were 539 Bcf higher than last year at this time and 566 Bcf above the 5-year average of 2,724 Bcf.

Electricity Prices Halve over the Year

Low natural gas prices have pulled electricity prices down as well. Despite the well appreciated decline for consumers, some states such as Massachusetts, Connecticut and high congestion zones in New York are still paying well above average prices for electricity.

Another Side of the XL Pipeline Debate. Bakken Oil is the 1.2 Billion Barrel Gorilla in the Room.

The arguments regarding the XL Pipeline fall into two camps. The oil distribution companies want to bring Alberta crude to US markets. The oil is produced from bitumen which is processed using significant amounts of natural gas.The environmentalists are opposed to the high CO2 levels used in production and they want to protect water, habitat and communities along the pipeline route.

The $13-Billion, 1666 mile-long pipeline was stopped by the Obama administration in a political battle between Republicans and Democrats in an election year.

Stepping back from the political games, what are the chances that the pipeline will not be built? Zero. And it has nothing to do with Alberta Crude or environmental issues.

Notice that the pipeline passes through the heart of the Bakken formation which is projected to contain 1.2 billion barrels of oil equivalent. The sheer mass of the oil in the Bakken will trump all environmental concerns because a pipeline is the optimal form of transportation, especially if you are concerned about environmental issues. Sources: Bismarck Tribune

Crude Watch

The intraday price on the CME/NYMEX market is $99.40, up $1.07 at 7:15 AM.

 OPEC Basket Data

Interesting Links and Resources

(Click on Links to View)

Chesapeake to Cut Exploration and Production (WAPO)
Chesapeake plans to reduce producing rigs to 24 due to low natural gas prices.

Electricity Declines 50% as Shale Spurs Natural Gas Glut (Businessweek)
Natural gas prices have reached price levels that make all other energy sources uncompetitive. "As profit margins shrink from falling prices, more generators are expected to postpone or abandon coal, nuclear and wind projects, decisions that may slow the shift to cleaner forms of energy"

Apache to Buy Codillera for $2.8 Billion
The investment in the Andarko basin running from Texas to Colorado looks like a safe bet on oil and gas bearing shales in states that pose little political and environmental risk to energy companies.

Schlumberger and Baker Hughes Promote New Super Fracking Technology
Schlumberger's HIWAY and Baker Hughes' Direct Connect represent the next generation of fracking technologies that will drive even greater field productivity and spur greater debate among concerned citizens.

High Oil Prices Hurt Many in the Northeast
Due to poor natural gas distribution systems, many Northeast communities are forced to use heating oil, a commodity that is reaching record prices this winter.

Weather Trends
Click on the links below to view the National Weather Service forecasts.