Monday, Jan. 19, 2009

Natural Gas Drops Below $5.00 per MMBTU
While Temperatures Drop
Despite the recent chill, natural gas continues to trend down. This morning at 9:15, natural gas is trading at $4.692 per mmbtu. We have not seen these levels since 2004.

According to the Jan. 13 EIA Short Term Energy Outlook, our recession will help keep natural gas prices down. The Henry Hub natural gas spot price is projected to decline from an average of $9.13 per Mcf in 2008 to $5.78 per Mcf in 2009, but then increase in 2010 to an average of $6.63 per Mcf.

Their economic view mirrors the consensus of most of the business press. They forecast that U.S. real gross domestic product will decline by 2 percent in 2009, which will reduce industrial demand for energy. Economic recovery is projected to begin in 2010, with 2 percent year-over-year growth in GDP.

Russian Hardball Will Hurt Ukraine's Economy
If you are puzzling over the Russian-Ukraine impasse, it is all about money and Russian hard ball. Earlier this month, Gazprom cited a possible price of $450 per 1,000 cubic meters for deliveries to Ukraine in January, reflecting the average price in countries bordering Russia's neighbor. It made the offer after saying Ukraine had rejected a gas price of $250. Ukraine had said $201 would be fair. Today, Russia said it would grant a 20 percent discount to Ukraine on European gas prices this year, while Ukraine agreed not to raise the low fee it charges Russia to use its pipelines to deliver gas to Europe. Ukraine will pay the full European price in 2010.

Most analysts expect Russia to cut its natural gas rates significantly to Europe in the next round of energy negotiations due to the economic slowdown, which is the primary reason that the Ukraine negotiators are reluctant to commit to a price that is viewed as extortionate. Ukraine paid Russia $179.50 per 1,000 cubic meters for gas last year. The new deal boost the price of natural gas much higher and will severely impact the Ukranian economy.

Russia's objective in the area is to destabilize any of the Former Soviet Union States that refuse to toe the line regarding Russia's diplomatic and economic objectives in the region. Putin wants Ukranian politicians to stop looking to the EU, and to pay fealty to Russia, whether they like it or not.

Natural Gas Storage
Working gas in storage was 2,736 Bcf as of Friday, January 9, 2009, according to EIA estimates. This represents a net decline of 94 Bcf from the previous week. Stocks were 28 Bcf higher than last year at this time and 81 Bcf above the 5-year average of 2,655 Bcf.

Natural Gas Exploration
Production activity in the US continues to decline. According to the Baker Hughes Drill Rig Report, there are 4 fewer rigs in the field last week (1/9/09) compared to the previous week; and 166 fewer rigs than last year at this time.

Natural Gas Market Watch- Intraday Prices Snapshot
Here are the intraday prices on the NYMEX electronic market this morning (Monday) at about 9:45 AM for the next five months($ per mmbtu, intraday prices):
Feb.-09 $4.710 -0.091
Mar.-09 $4.729 -0.084
Apr.-09 $4.796 -0.090
May.-09 $4.880 -0.084
Jun.-09 $5.009 -0.062

Natural Gas Futures:
PMC 30-Day, 90-Day, 12-month Natural Gas Futures Chart

Crude Oil Watch
The OPEC Basket Data price was up to $42.17 per bbl last Friday, Jan. 16, 2009.
West Texas Cushing traded up $1.11 to $36.51 per bbl on Friday 1/16/09.
NYMEX Crude front month future is down $1.77 per bbl this morning to $34.74 at 9:45.

Electricity Watch
Northeastern electricity prices are returning to a stable range. Review the historic trends for key electric markets in the Northeast with the Day Ahead Electric pricing data charts from the PMC database, updated every Monday.
 
Weather Trends
NOAA's forecast for next week indicates general warming through much of the Southeast with below average temperatures across the rest of the US. The fourteen-day forecast indicates above average temperatures for most of the country.
 
NOAA Forecast for Next Week
8-14 Day forecast
NOAA Forecast- 30-Days

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.