May 10, 2010

Crude Oil Surfs Political Wave

Two weeks ago, crude oil was trading at $87 and seemed to be on its way to $90 per bbl. And then Greece melted down. Crude oil was trading in the $74.75 range last Friday. So what's the connection? Greece is not an oil producer. The connection is financial and highlights the fact that crude oil is a prisoner of commodity, political and financial variables that have in the past, and will continue to destabilize it. In contrast, natural gas has become the boring wallflower of commodities. Thank God.

We saw an example of the volatility today. According to Bloomberg.com this morning, "Crude oil for June delivery rose as much as $3.40, or 4.5 percent, to $78.51 a barrel in after-hours electronic trading on the New York Mercantile Exchange. That's the biggest intraday surge since Sept. 30. The contract was at $77.70 at 11:24 a.m. in London, poised for its steepest daily gain since Feb. 16. Brent oil for June settlement on the London-based ICE Futures Europe exchange was up $2.64 at $80.91."

Why the spike? Was there an oil leak somewhere? No. Just Greece (and Europe) getting a bailout. With the Greek crisis and the gradually unfolding PIIGS denouement in Europe, the structural problem with crude oil should be placed front and center. The commodity's whipsawing ways should be the underlining of the bold fact that crude oil is too volatile a commodity upon which to base an economy.

Fortunately natural gas has a huge fan who is no wallflower in T. Boone Pickens, who has created a one-person campaign to save America through his Pickens Plan for Energy Independence. His analysis of the Deepwater Horizon blowout could be summed up in two words, "Accidents happen." The event for Mr. Pickens is a teaching moment for the country to reconsider its crude oil addiction.

The Pickens plan is easy to understand. There is an essential need for the US to become a country powered by renewables. Natural gas is the optimal bridge fuel that will get us there. The United States has over 200 years of natural gas. It is ours. It is available. Most of it is on land. We should use natural gas to drive our economy instead of crude oil, which is produced by "people who don't like us much". And Mr. Pickens' checkmate argument that no one can rebut is that the US is sending $475 billion overseas every year. Hopefully, the administration will pay more attention to the hard-scrabble, Republican wildcatter from Oklahoma. Mr. Pickens is encouraging everyone who agrees with his plan to send a message to Washington via a link on his website.

Natural Gas Storage Rises

Working gas in storage was 1,995 Bcf as of Friday, April 30, 2010, according to EIA estimates. This represents a net increase of 83 Bcf from the previous week. Stocks were 97 Bcf higher than last year at this time and 315 Bcf above the 5-year average of 1,680 Bcf.

Natural Gas Rigs Decline by 5

Baker Hughes reported that natural gas rigs declined by 5 (4/30/10) compared to the previous week. Over the past three weeks there has been a decline of 18 wells, which may indicate that we have reached a production plateau in the US. There are 223 more rigs in production than last year at this time. If the rig rate flattens or declines, there will be pressure on prices as a production floor is established.

Natural Gas Market Watch- Intraday Prices Snapshot

Here are the intraday prices on the CMEG/NYMEX electronic market today (Monday) at 11:44 AM for the next six months($ per mmbtu, intraday prices):

Jun. $4.176 +0.161
Jul. $4.280 +0.156
Aug. $4.367 +0.146
Sep. $4.441 +0.143
Oct. $4.564 +0.139
Nov. $4.984 +0.130

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

Crude Oil Watch
West Texas Cushing traded up $2.41 to $77.52 per bbl at 9:22 AM.
 OPEC Basket Data
 
Electricity Watch-
Electricity for all Northeast markets is trending up with the cold weather.
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.