August 31, 2009

Why Buy Dirty Heating Oil When Natural Gas is Such a Steal?
With natural gas bumping against seven year lows, the question that has to be asked of apartment building owners across the Northeastern United States is why aren't they ditching their oil-fueled boilers and converting to natural gas?

On a BTU-to-BTU basis, which is how we track the differential, crude oil is trading at 4.454 times natural gas in pure productivity. On Friday, heating oil on the NYMEX futures market was trading at $12.49 per 1000 BTU while cleaner natural gas was struggling to stay above $2.80 per 1000 BTU.

If market behavior is any indicator, crude's rapid return to its "evil" ways as a high priced commodity should turn on the lights for those who continue to use heating oil. Domestic natural gas is benefiting from excellent infrastructure, superior storage programs, highly successful production results and no threats of political crises. Of course many building owners and property developers have hedged their energy buy. Plus many have shifted energy expenses directly to tenants. Therefore they see no compelling reason to shift fuels, which will require installation expenses that can only be offset by rent increases.

As we enter an era where carbon has a real cost, this is the time for building owners to take a serious look at shifting to natural gas. This is also the time for government to provide real incentives to owners to sweeten the deal to make the switch. Under the Federal Stimulus Plan, under-funded state energy programs will be receiving hundreds of millions. It would be wise to use some of that as grants to incentivize boiler conversions. (Click Here to link to a 2006 Energy & Power Management Magazine Report on Energy Efficiency Incentives in the US.)

EIA Publishes Short Term Energy Report on CO2
For those wondering if the government was getting serious about greenhouse gas emissions, the answer is yes. They are at least serious enough to create a monthly data review as one of their STEO's. The report provides a history and forecast of CO2 emissions from the consumption of the three fossil fuels:coal, natural gas, and petroleum. The EIA predicts a 5% decline in US CO2 emissions in 2009 due to the recession. (Click Here to link to the report as a PDF.)

Natural Gas Storage 3.258 TCF and Growing
Working gas in storage was 3,258 Bcf as of Friday, August 21, 2009, according to EIA estimates. This represents a net increase of 54 Bcf from the previous week. Stocks were 516 Bcf higher than last year at this time and 500 Bcf above the 5-year average of 2,758 Bcf. A little over 16% of US annual consumption is now in storage, 60-days before the heating season begins.

Natural Gas Market Watch-
 Intraday Prices Snapshot
Here are the intraday prices on the NYMEX electronic market today (Monday) at about 10:25 AM for the next six months($ per mmbtu, intraday prices):

Oct. $2.952 -0.081
Nov. $3.972 -0.081
Dec. $4.826 -0.087
Jan. $5.126 -0.085
Feb. $5.210 -0.077
Mar. $5.195 -0.093

Natural Gas Futures:
PMC 30-Day, 90-Day, 12-month Natural Gas Futures Chart

Crude Oil Watch
West Texas Cushing traded down $1.89 to $70.85 per bbl today at 9:10 AM.
NYMEX Crude front month future is down $2.78 to $69.96 per bbl at 10:44 AM today.
 OPEC Basket Data

Electricity Watch-
Cool weather ahead should keep electricity low over the next two weeks.
For more information view the Day Ahead Electric pricing data charts from the PMC database, updated every Monday.
 
Weather Trends- Summer Chill Ahead
Most of the US will have seasonal conditions with cooler than average temperatures in the Northeast.
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.