Dec. 7, 2009

Cold Weather and Recovering Economy Spurs Prices

While the PMC natural gas charts indicate that the short-term trend is downward, prices are rising toward the five-dollar mark this morning. At 10:45 AM the CMEG/NYMEX natural gas front month price was up $0.314 to $4.900 per mmbtu.

According to Bloomberg.com, cold weather and a warming economy may be driving the price increases. Traders are looking at the unexpectedly low number of job losses announced last week as a potential indicator of a bottom. Jim Cooper of Businessweek has been commenting for weeks in his "Business Outlook" column that business can not maintain the current above-average levels of productivity; employment had to happen some time. Most economists were surprised by the sudden drop. In this week's issue, Mr. Cooper notes that the consumer also seems to be coming back to the stores. "Outlays adjusted for inflation and excluding autos grew at 2.6% annual rate rom May through October... the fastest pace in more than two years." (Businessweek, 12/14/09)

Bloomberg Backs Away from NY City Environmental Enforcement
Mayor Bloomberg took the bite out of New York City's recent environmental legislation last week, which required New York City landlords to perform an energy audit, and implement upgrades based on the audits. We critiqued the plan when it was announced on Earth Day as vague and unrealistic due to the dearth of incentives provided to the landlords. "It's another unfunded mandate, and this is just not the time for it," said Stuart Saft, chairman of the Council of New York Cooperatives and Condominiums, an opponent of the plan. "Come back in five years when we're past this recession. At this point it's just a slap in the face." The city will still require an energy audit for buildings over 50,000 s.f., which we support. However, the city still needs to be more realistic and offer some form of incentive for the landlords. Until that happens, few owners will take action. (Quote from NYT, 12/5/09)


Natural Gas Inventory Injections Continue
There is a good chance that this week will be the first week of the drawdown that is normal for this time of year. Working gas in storage was 3,837 Bcf as of Friday, November 27, 2009, according to EIA estimates. This represents a net increase of 2 Bcf from the previous week. Stocks were 470 Bcf higher than last year at this time and 487 Bcf above the 5-year average of 3,350 Bcf.

Natural Gas Exploration
According to Baker-Hughes, there were 748 active natural gas rigs in the US as of last week with no change in the numbers of rigs from the previous week. There are 680 fewer rigs in operation last week than last year. The exploration trend has been positive since July 17th of this year.

Natural Gas Market Watch- Intraday Prices Snapshot
Prices have been moving up today in intraday trading on the CMEG/NYMEX. Notice the unusually narrow differential from month to month over the next six months. The market seems to be indicating that $5.00 per mmbtu is the price channel this winter and early spring.
Here are the intraday prices on the CMEG/NYMEX electronic market today (Monday) at about 10:45 AM for the next six months($ per mmbtu, intraday prices):
Jan. 2010 $4.900 +0.314
Feb. 2010 $4.988 +0.316
Mar. 2010 $5.026 +0.319
Apr. 2010 $5.052 +0.295
May. 2010 $5.101 +0.284
Jun. 2009 $5.171 +0.273

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

Crude Oil Watch
West Texas Cushing traded down $0.89 to $74.58 per bbl today at 9:10 AM.
NYMEX Crude front month future is down $0.82 to $74.65 per bbl at 10:28 AM today.
 OPEC Basket Data
 
Electricity Watch-
The high in the Northeast was ISO-NE, which opened at $53.43 per MWH this morning on the day-ahead market; NY-ISO A (Western NY) was the lowest at $35.00 per MWH. Prices in the Buffalo area are typically the lowest in the region due to the access to hydro-power and it may also reflect poor demand due to economic conditions.
For more information view the Day Ahead Electric pricing data charts from the PMC database, updated every Monday.
Weather Trends-
The Eastern US will have colder than average weather over the next week. According to NOAA, El Nino is expected to continue strengthening and last through at least the Northern Hemishphere Winter.
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.