November 23, 2009

To Fix or Not To Fix, That is the Tough Question
The energy markets are looking very stable as we enter the winter heating market, which is causing business professionals to look beyond this winter to lock-in prices for the winter of 2010-11.

The market seems to be pricing in an economic recovery. The future price for natural gas for Dec./09 is $4.553 per mmbtu; the price for natural gas next year is pegged at $6.423 per mmbtu. (Both prices are intraday prices.) This is a classic contango situation, which may cause some to float with the market. Compared to last year, natural gas is $2.50 lower.

Our mantra this year is to stick to the basics. We don't need to lecture about energy price volatility; it is the new norm. If your contracts are coming up for renewal, we encourage energy buyers to continue to lock in a percentage of their energy purchases to protect from volatile swings up. Price certainty helps financial planning and provides some risk protection. Every company is different and each has its own risk tolerance level. But now is a good time to review your energy strategy while the market is behaving somewhat normally and emotion is out of the equation.

Natural Gas Storage Continues to Rise
Despite the fact that we are three weeks into the heating season, natural gas injections continue. Working gas in storage was 3,833 Bcf as of Friday, November 13, 2009, according to EIA estimates. This represents a net increase of 20 Bcf from the previous week. Stocks were 347 Bcf higher than last year at this time and 419 Bcf above the 5-year average of 3,414 Bcf.

Natural Gas Exploration

To the left, is an interesting chart from the Baker Hughes site that demonstrates graphically the productivity decline and recovery by basin for both oil and natural gas rigs.

According to the Baker Hughes rig blog, "the exploration crash for natural gas ended on July 17th at 665 and since then we have added 47 gas-directed drilling rigs or a little more than 4 rigs per week". All but five rigs have been horizontal projects.

It looks like the Western Gulf and the Permian Basin areas are the slowest to recover, while the unconventional fields are leading the way. The trend indicates that unconventional gas may represent a much larger percentage of natural gas production in the near future than prior to the economic crisis. Many of the unconventional gas fields have exceeded production estimates. There have been excellent results in several Marcellus Shale wells in Pennsylvania, but the dataset is still too small to safely indicate any production trends. New Haynesville Shale projects have demonstrated excellent production results. One of the problems with tracking Pennsylvania fields is a five-year moratorium on production data in order to protect privacy. (Source: Baker Hughes Rig Count Blog)

Natural Gas Market Watch- Intraday Prices Snapshot
Here are the intraday prices on the CMEG/NYMEX electronic market today (Monday) at about 10:45 AM for the next six months($ per mmbtu, intraday prices):
Dec. 2009 $4.548 +0.124
Jan. 2010 $4.905 +0.147
Feb. 2010 $4.991 +0.146
Mar. 2010 $5.027 +0.139
Apr. 2010 $5.058 +0.128
May. 2010 $5.108 +0.115

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

Crude Oil Watch
West Texas Cushing traded up $1.78 to $78.50 per bbl today at 9:16 AM.
NYMEX Crude front month future is up $1.91 to $79.88.41 per bbl at 9:13 AM today.
 OPEC Basket Data
 
Electricity Watch-
Electricty in some of the eastern zones of the NYISO declined for a few days last week to prices in the $17-$20 per MWH levels. Generally, northeastern electricity prices are 50% lower than last year.Northeastern electricity prices are averaging close to $41 per MWH this morning. The short term trend is still down.
For more information view the Day Ahead Electric pricing data charts from the PMC database, updated every Monday .
 
Weather Trends-
The Northeastern and Southeastern US will be unseasonably cooler over the next three weeks.
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.