March. 15, 2010

Traders' Behavior Indicating That Winter is History

With natural gas trading at levels not seen since mid-November/09, the market slump in natural gas continues this morning with the front month natural gas prices at $4.386 per mmbtu at 11:05 AM; down just $0.014.

Market commentators seem to be leaning to lower natural gas prices due to a combination of key supply and demand factors such as high temperatures, increased production and ample storage. There are conflicting weather models afoot. While some point to a warmer than average March and April, the National Weather Service is predicting cooler temperatures ahead. Don't put away your winter boots just yet.

US Economy Treading Water
Currently, there is no 800 pound gorilla on the horizon that will reverse the steady decline in natural gas prices. Despite the strength that we saw in the US economy in the fourth quarter/09, recent employment indicators and weather-related plant closings seem to point to a slight plateau in manufacturing recovery. As a result, one can not depend on industrial demand over the short term to heat up natural gas prices. The U.S. Labor Department on March 10 reported the unemployment rate in January climbed in 30 states and decreased in nine. Sixteen states had jobless rates topping the nationwide 9.7 average unemployment rate.

Coal Company Gets Natural Gas Religion
Today, Consol Energy, the fifth largest US coal company, made a big play for Marcellus Shale Gas with the acquisition of Dominion Resources Inc.'s natural gas and oil exploration and production business. Consol's price was a hefty $3.48 billion to expand its Appalachian presence. Consol is currently known for bituminous coal extraction and producing coal bed methane gas.

The sale, which was anticipated, includes rights to 491,000 acres in West Virginia and Pennsylvania, which will increase Consol's natural gas reserves by 50 percent to 3 trillion cubic feet from 1.9 trillion. Consol's management is positioning the company for a future where natural gas's lower GHG emissions make it the optimal fuel for electrical generation in a region that is determined to reduce CO2 levels. (Source: http://phx.corporate-ir.net/phoenix.zhtml?c=66439&p=irol-newsroom&nyo=0)

Natural Gas Storage Report
Working gas in storage was 1,626 Bcf as of Friday, March 5, 2010, according to EIA estimates. This represents a net decline of 111 Bcf from the previous week. Stocks were 71 Bcf less than last year at this time and 19 Bcf above the 5-year average of 1,607 Bcf.

Natural Gas Market Watch- Intraday Prices Snapshot
Here are the intraday prices on the CMEG/NYMEX electronic market today (Monday) at 10:50 AM for the next six months($ per mmbtu, intraday prices):

Apr. $4.386 -0.014
May. $4.459 -0.007
Jun. $4.532 -0.006
Jul. $4.622 -0.010
Aug. $4.690 -0.012
Sep. $4.728 -0.012

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

Crude Oil Watch
NYMEX Crude front month future is down $0.49 to $80.75 at 8:42 AM.
West Texas Cushing traded down $0.87 to $81.24 per bbl on 3/12/09.
 OPEC Basket Data
 
Electricity Watch-
Electricity for all Northeast markets is below $50.00 per MWH and continues to trend down with natural gas prices. In this type of market, we still think you might want to consider floating the market with basis until the US economy shows some real vitality.


For more information view the Day Ahead Electric pricing data charts from the PMC database, updated every Monday.

Weather Trends-
09-2010.
NOAA Forecast for Next Week
8-14 Day forecast
NOAA Forecast- 30-Days
El Nino-La Nina (Pacific Ocean Temperature Levels)
Arctic Oscillation (Arctic Pressure Patterns)

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.