August 8, 2011 

Natural Gas Prices Pull Back Due to Summer Doldrums and Financial Uncertainty and

August is the month of nights at the beach, fishing on the dock and buying natural gas futures. August is typically one of the best months to lock in natural gas futures. We struggle to find a technical reason that this is so. I would prefer a behavioral economics spin on this market phenomena. When the weather is hot and everyone is on vacation, the last thing anyone is thinking about is the cold of winter. If there is no perceived demand (no buyers), the price drops.

Natural gas on the CME-NYMEX market reached $3.902 per mmbtu at 9:15 AM; down $0.039. Technical traders view the drop on Friday as a significant plunge through their support level of $3.95 per mmbtu. Any price below $4.00 will spook the industry and may result in production cutbacks to strengthen the price.

Combine the typical summer blahs with the global financial crisis and we have a bit of a double-whammy pulling energy prices to earth. The middling US economy that is approaching no-growth and potentially recession status certainly is not painting a picture for higher energy demand in the near future. Poor Uncle Sam was disciplined Friday with a downgrade by one of the agencies that caused the 2008 meltdown, Standard and Poors. This morning the DJIA fell 290 points, losing over 2% in very active trading. The general malaise of the financial industry has now infected Europe even more severely than the US. Crude oil is much more impacted by world events than natural gas. WTI Crude Oil has taken a $15.36 dive over the past 10 days, losing 16%.

Natural Gas Futures Market

CME-NYMEX natural gas futures market intraday prices for August 8, 2011 at 9:35 AM.
(Prices are USD per mmbtu)

Sep. - $3.902 -$0.039
Oct. - $3.932   -$0.042
Nov. - $4.079 -$0.034
Dec. - $4.299 -$0.031
Jan. - $4.401 -$0.031
Feb. - $4.407-$0.031
Mar. - $4.381 -$0.025

PMC 30-Day Natural Gas Futures Chart

Natural Gas Storage Increases by 44 BCF
Working gas in storage was 2,758 Bcf as of Friday, July 29, 2011, according to EIA estimates. This represents a net increase of 44 Bcf from the previous week. Stocks were 186 Bcf less than last year at this time and 68 Bcf below the 5-year average of 2,826 Bcf. By all standards the injection season is proceeding normally.

Electricity Markets Equilibrate

Prices in the Northeast have pulled back from the heat-wave spikes and appear to be moving back to a very benign channel below $60.00 per WWH. The rapid price modulation to a lower-priced channel may indicate that we are beginning to see the benefit of Marcellus Shale production in the Northeast. Lower spot prices will lead to lower summer rates so long as the heat skirts the Northeast.

Crude Watch

Light Sweet Crude (WTI) is trading today on the CME/NYMEX market at $83.42, down $3.41 at 8:05 AM.

 OPEC Basket Data

Interesting Links and Resources

(Click on Links to View)

GDF May Sell 30% of Exploration-Production Unit to Chinese  (Bloomberg)

Renewables May Be the First Victims of the US Downgrade (Bloomberg)

New Jersey Revising Energy Plan for Marcellus Factor  (Asbury Park Press)

PJM Study Indicates that Demand Response Cut Coal Use (Energybiz.com)

NYISO Plans Smart Grid Kickoff   (Times Union)

Let There Be LED Light Networks

Every now and then, a TED Show presenter introduces a technology that heralds a paradigm shift for an industry. Professor Harald Haas presented his lab's invention five days ago at TED Global. He demonstrated that every LED light can be programmed to carry data, creating Li-Fi networks that are based on lighting.

Theoretically, your lighting system could become your communications and data backbone. It will be orders of magnitude faster and potentially more secure than radio-spectrum based technology (WI-Fi). One $25.00 LED bulb can transmit more data than a standard cell tower. Smart lighting needs to be redefined as a result of Haas' experiments. Click here to view his presentation on You Tube.

Weather Trends
The 6-10 Day National Weather Service's Forecast indicates warm weather ahead for much of the Southern US. The exception is the Northeast, which will experience below-average temperatures.