July 26, 2010

Natural Gas Prices Rise with Warmth, But Retrace Gains

The news that this may be the warmest summer on record has not been enough to keep natural gas above $5.00 per mmbtu. The fuel has been declining since mid-June when it reached over $5.20 per mmbtu. This morning at 11:24, it is trading at $4.566, down less than a cent from yesterday's close.

It is all about fundamentals. Supply. Storage. Demand. The first two are extremely healthy and the demand, at least industrial demand remains flat. The weather forecasters are predicting a return to normal temperatures over the next few weeks, which will be appreciated by a well cooked East coast. If this materializes, expect lower prices ahead for natural gas. Technicians see $4.28 as a bottom for natural gas.

Production Gears Up
With 3 natural gas wells added in the last week of June in the US, the total of NG rigs in the US is 982, up 307 from last year.

Natural Gas Storage Report
Working gas in storage was 2,891 Bcf as of Friday, July 16, 2010, according to EIA estimates. This represents a net increase of 51 Bcf from the previous week. Stocks were 52 Bcf less than last year at this time and 261 Bcf above the 5-year average of 2,630 Bcf.

Marcellus Drillers Vs. Government Oversight
In Pennsylvania, the Pennsylvania PUC is considering stepping in to provide more oversight of the drilling and production process. The US EPA is holding forth on hydro-fracking in New York. In Albany, Pete Seeger and Mark Ruffalo led an protest in support of another moratorium on drilling, citing concerns over polluted water supplies.

On the other side of the debate, Nick Snow, editor of Oil and Gas Journal warns the states to be careful about adding more oversight and taxes, or else the drillers will walk and produce other structures. Sure Nick. The probability of gas exploration companies walking away from the second largest natural gas deposit in the world is close to nil. There are some in the industry who seem to be reading the tea leaves of popular sentiment. The industry has agreed to release the ingredients of its fracking chemicals to states. Still, you can rest assured that the states will demand better petro-enginnering processes and more inspections from an industry that is widely viewed as being prone to cutting corners in areas of safety, thanks to BP's disasters in Texas and the Gulf.

Why is Marcellus important? It represents, the natural gas supply for the entire east coast for at least the next forty years. The structure may hold as much as 500 TCF of natural gas. The entire US uses a little over 20 TCF a year. Both the states and the drillers have more to gain by working together than by pursuing obstructionist tactics.

Natural Gas Market Watch- Intraday Prices Snapshot
Here are the intraday prices on the CMEG/NYMEX electronic market today (Monday) at 10:15 AM for the next six months($ per mmbtu, intraday prices):

Aug. $4.566 -0.014
Sep. $4.537 -0.026
Oct. $4.574 -0.026
Nov. $4.801 -0.039
Dec. $5.070 -0.057
Jan. $5.231 - 0.061

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

Crude Watch
NYMEX Crude (WTI) front month future is down $0.02 to $78.82 at 9:30 AM.
 OPEC Basket Data
 
Electricity Watch-
The record-breaking heat wave has created an energy chart that looks like an amusement park roller-coaster ride. The grids strained, but did not break under the load.
For more information view the Day Ahead Electric pricing data charts from the PMC database, updated every Monday.

Weather Trends-
NOAA is predicting a break from the heat and a return to seasonable weather ahead for much of the East Coast.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.