Monday, Feb. 2, 2009

Natural Gas Drops to 2004 Levels And Then Reverses Itself
Today, natural gas prices sank to as low as $4.24 per mmbtu for the front month on NYMEX before rallying around 10:00 AM. It is currently $4.594 per mmbtu at 12:42 PM. We're not certain why the price turned so dramatically to the upside today. Consumer spending fell for a record six months, which also drove crude down 4.4%.

Possibly, and this is a stretch, the news that deflation was evaporating may have turned the market. According to Bloomberg.com, "The yield on 10-year notes exceeds the consumer price index by 2.72 percentage points, the most since December 2006. The gap between two- and 10-year rates widened at the fastest pace in a year last month as traders demanded more compensation for longer-term debt. Treasury Inflation Protected Securities that signaled falling prices as recently as Nov. 20 show they will increase in the U.S. this year."

Is Possible LNG Glut Good News for Pickens Plan?
For those who are leaning to the T. Boone Pickens Plan as a path to energy independence, the news about Worldwide LNG production is interesting. According to a Houston Chronicle article on Jan. 31, 2009, worldwide LNG production will increase by 20% just as the demand is declining worldwide due to the global recession. Analysts predict that the excess LNG will go wherever there is excess storage. Once in storage, it will be sold at highly competitive rates. The US is the ideal market. LNG imports may increase as much as 30% this year despite the fact that we don't need it. This excess inventory should help keep natural gas prices in the lower ranges.

 How does this help the T. Boone Pickens plan? If the US is going to shift its energy transportation mix to include Compressed Natural Gas for its trucking fleet, abundant supply and low prices would certainly help convince the current administration that the plan has long-term merit. Natural gas companies like Chesapeake Energy would love to develop a massive new demand channel and take energy market share from the likes of Exxon, which struggled through 2008 with only a $45 Billion profit.

Natural Gas Storage
Working gas in storage was 2,374 Bcf as of Friday, January 23, 2009, according to EIA estimates. This represents a net decline of 186 Bcf from the previous week. Stocks were 34 Bcf higher than last year at this time and 29 Bcf above the 5-year average of 2,345 Bcf.

Natural Gas Exploration
Production activity in the US continues to decline. According to the Baker Hughes Drill Rig Report, there are 35 fewer rigs in the field last week (1/23/09) compared to the previous week; and 282 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 12:47 PM for the next five months($ per mmbtu, intraday prices):
Mar.-09 $4.594 +0.177
Apr.-09 $4.649 +0.160
May.-09 $4.731 +0.157
Jun.-09 $4.846 +0.157
Jul.-09 $4.978 +0.159

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 $42.04 per bbl at end of day last Friday.
West Texas Cushing traded down $0.78 this afternoon to $40.90 per bbl at 12:16PM.
NYMEX Crude front month future is down $0.66 per bbl this afternoon to $41.02 at 12:08 PM.

Electricity Watch
Northeastern electricity prices remain in 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
Punxsutawney Phil today predicted six more weeks of winter-- so take that National Weather Service and your forecast of above average temperatures! 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.