January 9, 2012

Natural Gas Stuck at $3.00 per MMBTU, Down 32.4% Compared to Last Year

In early trading this morning, natural gas broke below $3.00 per MMBTU again, to reach 2.99, down six cents on the CME-NYMEX market. There does not seem to be any strong commitment by traders to higher prices for natural gas. Natural gas is down 32.4% since January, 2011.

Today, the highest price in the 12-month futures is $3.869 per mmbtu for the month of January 2013.

To put this in perspective, in 2008, natural gas prices were $4.50 higher as you can see in the chart below.

If we dial back, two more years, it becomes even more dramatic. In June of 2008, spot natural gas in intraday trading rose as high as $16.00 per mmbtu. In the chart below, you can see that the highest end-of-day price for spot natural gas was $13.28 on July 1, which is over four times higher than today's price.

If we go back two more years to Katrina, we will find spot prices over $15.00 per mmbtu.

With prices hovering at $3.00 per mmbtu, we definitely appear to be on the back end of the "wall-of-worry", when all is well and planning seems to be unnecessary.

Actually, this is the ideal time to ask basic questions and examine strategies to plan for the inevitable commodity swings that are a part of the energy market.

Can natural gas go lower? Of course it can.

But look at the charts and ask yourself this question; is it more likely that energy prices will rise higher from this level than decline?

Does the upside risk outweigh the downside risk?

Would it make sense to take a percentage of your upside risk off of the table, at least for the next twelve months at these prices?

How likely is it that the market will not be affected by weather, business cycles or the return of market manipulation?

Our role is to provide you with timely information so that you can adapt to changes in the energy marketplace. We feel that energy consumers are in a sweet spot at this time. It is up to your planners to assess trends and pursue appropriate risk avoidance strategies. Feel free to call us at 585-249-1360 to discuss your options.

Natural Gas Futures Prices

CME-NYMEX natural gas futures market intraday prices for January 9, 2012 at 8:15 AM.
(Prices are USD per mmbtu)

Feb. 2012- $2.994 -$0.068
Mar. 2012 - $3.043 -$0.055
Apr. 2012- $3.104 -$0.050
May. 2012- $3.159 -$0.049
Jun. 2012-  $3.209 -$0.051
Jul.  2012 - $3.261 -$0.055

PMC 30-Day Natural Gas Futures Chart

Natural Gas Storage is 458 BCF Above Five-Year Average

Working gas in storage was 3,472 Bcf as of Friday, December 30, 2011, according to EIA estimates. This represents a net decline of 76 Bcf from the previous week. Stocks were 356 Bcf higher than last year at this time and 458 Bcf above the 5-year average of 3,014 Bcf.

A Little Chill Pops Electricity Over $90 Per MWH

It is not surprising to see the spike in the Day Ahead Market for electricity that we experienced last week. You could say it supports our argument in the previous piece that energy markets are volatile. They can change in a flash.

Crude Watch

The intraday price on the CME/NYMEX market is $101.26, down $0.30 at 8:15 AM.

 OPEC Basket Data

Interesting Links and Resources

(Click on Links to View)

Shale Bubble Inflates on Near Record Prices
Foreign companies are now investing billions to buy in to untested fields.

Natural Gas Storage May Exceed Capacity in 2012
The warm winter may result in a storage glut next year.

Drop in Natural Gas Prices Won't Derail Ohio Drilling
Drillers are ready and willing to sink their bits into Ohio shale as natural gas prices dip.

Plainfield Connecticut's Renewable Biomass Project Receives $225-Million in Financing
Carlyle Group, Enova and SAIC provide resources for 37.5 MWH renewable energy project.

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