Jan. 4, 2010

China's New Boom Driving Crude Prices Up; Arctic Cold Heating up Natural Gas Prices

The energy world is heating up again. With economists predicting that China will achieve growth rates in excess of 10% in 2010, the world market views a resurgent China as a demand generator thus driving crude oil prices up to over $80.00/bbl.

In the US, the winter chill is keeping natural gas prices within range of $6.00 per mmbtu.

124 BCF Natural Gas Inventory Withdrawal Due to Cold Wave
Working gas in storage was 3,276 Bcf as of Friday, December 25, 2009, according to EIA estimates. This represents a net decline of 124 Bcf from the previous week. Stocks were 379 Bcf higher than last year at this time and 391 Bcf above the 5-year average of 2,885 Bcf.

Natural Gas Exploration
According to Baker-Hughes, there were 759 active natural gas rigs in the US as of last week with 8 additional rigs more than the previous week. There are 508 fewer rigs in operation last week than last year at this time. The exploration trend has been positive since July 17th of this year.

We are keeping tabs on the Marcellus Formation production. The chart below demonstrates the increased exploration activity in Pennsylvania through 2009. Our educated guess is that most of the new activity is targeted on the Marcellus Natural Gas. The sooner the Marcellus Formation is explored, the sooner Northeastern markets will receive the unconventional gas.

In New York State, the Department of Environmental Conservation analyzed 13 samples of wastewater brought thousands of feet to the surface from drilling and found that they contain levels of radium-226, a derivative of uranium, as high as 267 times the limit safe for discharge into the environment and thousands of times the limit safe for people to drink. Problems with how to handle the "hot" water; plus New York City's concern about aquifer contamination of its water supply may slow down exploration in the Empire State.

Chilly Temps Spur Big 207 BCF Natural Gas Inventory Withdrawal
Working gas in storage was 3,566 Bcf as of Friday, December 11, 2009, according to EIA estimates. This represents a net decline of 207 Bcf from the previous week. Stocks were 381 Bcf higher than last year at this time and 433 Bcf above the 5-year average of 3,133 Bcf.

Natural Gas Exploration Trending Up
According to Baker-Hughes, there were 773 active natural gas rigs in the US as of last week with 16 additional rigs more than the previous week. There are 593 fewer rigs in operation last week than last year at this time. The exploration trend has been positive since July 17th of this year.

Natural Gas Market Watch- Intraday Prices Snapshot
Here are the intraday prices on the CMEG/NYMEX electronic market today (Monday) at about 10:00 AM for the next six months($ per mmbtu, intraday prices):

Feb. 2010 $5.760 +0.188
Mar. 2010 $5.713 +0.181
Apr. 2010 $5.685 +0.180
May. 2010 $5.720 +0.175
Jun. 2009 $5.798 +0.183
Jul. 2010 $5.874 +0.179

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

Crude Oil Watch
China's recovery is pushing world crude prices higher today.
West Texas Cushing traded up $1.97 to $81.33 per bbl today at 9:09 AM.
NYMEX Crude front month future is down $1.80 to $81.16 per bbl at 9:28 AM today.
 OPEC Basket Data
 
Electricity Watch-
Electricity is rising on the Day Ahead Market today. It is up to the $80 per MWH range this morning for the ISONE and PJM markets; mid-$50 per MWH for the ISO NY prices.

For more information view the Day Ahead Electric pricing data charts from the PMC database, updated every Monday.
Weather Trends-
According to NWS maps, the Eastern US will have colder than average weather over the next three weeks.
inter 2009-2010.
NOAA Forecast for Next Week
8-14 Day forecast
NOAA Forecast- 30-Days
El Nino-La Nina (Pacific Ocean Temperature Levels)

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.