March. 29, 2010

Consumer Spending is Slowly Fueling Economy

Natural gas prices this morning are trading in the $3.90 range per mmbtu, indicative of perfect weather, abundant supplies and modest demand. Natural gas analysts warn that a sudden increase in domestic industrial demand could fire up natural gas prices. This analysis may not be taking into account the persistently high rate of new shale gas production that keeps coming online. While the US economy grew by a very strong 5.6% over the last three months of 2009, we did not see any supply/demand issues in any region. The natural gas market seems to be operating at optimal levels for energy consumers. The impact of low energy prices is also having a significant positive impact on corporate and non-profit bottom lines across the US.

The factor that is driving this stealth growth is the US consumer whose spending has been increasing slowly month to month for five months. The spending increase of 0.3% in February follows the 0.4% increase in January. Positive spending growth trends are followed closely by increased industrial demand. An increase of just 1% in spending has a significant impact on the economy since consumer spending represents over 66% of US economic activity. Right now, the energy consumer is in a sweet spot, which could persist for several months, especially if cold weather truly is history for this year.

Big Energy Betting on Natural Gas

With Exxon's purchase of XTO closing in the second quarter of this year, we are seeing a continuing trend of Big Energy buying into natural gas. XTO has significant shale gas reserves in the US. In our last EnergyNews Flash, we discussed CONSOL's purchase of Dominion, which they followed last week with its $364-million purchase of 17.5 % of CNX Gas, further strengthening its hold over Marcellus Shale gas production and distribution. These mega-purchases by Big Energy are all at premium prices, but the purchasers are clearly betting that the deals will sweeten for them once price levels for natural gas return to $6.00-plus per mmbtu. (Source: Business Week, Bloomberg.com)

Natural Gas Storage Report
Natural Gas Storage Report-
Is This the End of the Heating Draw-Down?
With the net injection of 11 BCF, traders are wondering if the inventory draw-down is ending prematurely. The weather forecast would seem to support this possibility, which will help keep prices at current levels.


Working gas in storage was 1,626 Bcf as of Friday, March 19, 2010, according to EIA estimates. This represents a net increase of 11 Bcf from the previous week. Stocks were 28 Bcf less than last year at this time and 121 Bcf above the 5-year average of 1,505 Bcf.

Natural Gas Market Watch- Intraday Prices Snapshot
Here are the intraday prices on the CMEG/NYMEX electronic market today (Monday) at 10:05 AM for the next six months($ per mmbtu, intraday prices):

Apr. $3.910 +0.038
May. $3.977+0.047
Jun. $4.058 +0.051
Jul. $4.155 +0.051
Aug. $4.223 +0.051
Sep. $4.255 +0.048

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

Crude Oil Watch
NYMEX Crude front month future is up $1.94 to $81.94 at 9:58 AM.
West Texas Cushing traded up $0.65 to $80.65 per bbl at 9:03 AM.
 OPEC Basket Data
 
Electricity Watch-
Electricity for all Northeast markets is trading at low levels. We still encourage energy buyers to continue to float with basis and be patient; and to also be prepared to act to lock-in prices over the next sixty days. There is a premium to be paid for locking in prices that could come down to lower levels. Considering that we are entering the natural gas injection season early indicates that time is on our side.

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.