March. 1, 2010

Weather and Our Slow Recovery Combine to Pull Energy Prices Down
According to a Bloomberg.com article this morning by Reg Curren, EarthSat Energy Weather is predicting a warming trend through the Midwest next week, which may be the factor that has pulled prices down to an intraday low this morning (3/1/10) to $4.7145 per mmbtu. The National Weather Service, on the other hand, is forecasting colder than average temperatures over the next three weeks. Supporting the Earth Sat model is the fact that the Arctic Oscillator has finally risen and the weakening El Nino is beginning to look like it is warming up, which could help lift temperatures over the next three months; and increase precipitation. (Bloomberg.com)

In Business Week's Business Outlook section this week, the specter of inflation appears to be dead, but watch out for deflation. Core US consumer prices were pegged at 0% for the last three months through January. According to Rich Miller of Business Week, the worry is now shifting to deflation. He notes that the driving force is industrial demand. The US, at the bottom of the recessions's trough was operating at 68.3% capacity. The January number for industrial capacity was 72.6%. The spare capacity places pressure on companies to keep profits low because companies are seeking to maximize productivity of the plants that have survived the recession's attrition. Deflationary price declines are actually more debilitating than inflation since they directly impact on earnings, which have turned around dramatically for the S&P 500 companies. US companies earned over $500 billion in 2009 with energy, financials and consumer discretionary industries leading the profit march. Deflation would erode profits quickly.

It looks like the economists who warned that the recovery would be slow and steady were right on the mark. The anemic growth of industrial demand should serve as an anchor on energy prices for at least the next six months. Janet Yellen of the SF Federal Reserve warns that full recovery may not occur until 2013. (Source: BW, 3/8/10)

Natural Gas Storage Report
Working gas in storage was 1,853 Bcf as of Friday, February 19, 2010, according to EIA estimates. This represents a net decline of 172 Bcf from the previous week. Stocks were 56 Bcf less than last year at this time and 13 Bcf above the 5-year average of 1,840 Bcf. Over the two consecutive weeks, more than 362 BCF were pulled from storage. Despite the huge chunk of natural gas pulled from storage, prices have been steadily declining.


Natural Gas Market Watch- Intraday Prices Snapshot
Here are the intraday prices on the CMEG/NYMEX electronic market today (Monday) at 10:10 AM for the next six months($ per mmbtu, intraday prices):

Apr. $4.836 +0.023
May. $4.901 +0.022
Jun. $4.981 +0.022
Jul. $5.061 +0.018
Aug. $5.128 +0.021
Sep. $5.167 +0.022

Natural Gas Futures:
PMC 30-Day Natural Gas Futures Chart

Crude Oil Watch
NYMEX Crude front month future is up $0.56 to $80.22 at 9:14 AM.
West Texas Cushing traded up $0.69 to $80.35 per bbl at 9:07 AM.
 OPEC Basket Data
 
Electricity Watch-
Electricity for all Northeast markets is trending down in tandem with the decline in natural gas prices. It looks like electricity prices may be trending to a price channel similar to what we saw last year at this time. (See chart below.) In this type of market, you might want to consider floating the market with basis until the economy shows some muscle.



For more information view the Day Ahead Electric pricing data charts from the PMC database, updated every Monday.
Weather Trends-
09-2010.
NOAA Forecast for Next Week
8-14 Day forecast
NOAA Forecast- 30-Days
El Nino-La Nina (Pacific Ocean Temperature Levels)
Arctic Oscillation (Arctic Pressure Patterns)

Written and Researched by Martin Linskey; Energy Charts developed by Charles Myers.

Disclaimer: This information is provided for the use of our customers and potential customers. Power Management Company assumes no responsibility or liability for the accuracy or completeness of pricing or information in this document. Historical data was obtained from sources that we believe to be reliable, but we do not guarantee its accuracy or completeness. It is not intended to provide advice or recommendation. Views are subject to change without notice.