Energy Update - 07/25/2014  (Plain Text Version)

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In this issue:
Editor's Note
•  Up And Down
Natural Gas Fundamentals
•  Natural Gas Storage Update: Injection Season Hits Midway Point
•  Rig Count for Natural Gas
•  NYMEX Natural Gas Monthly Settlements for the Past 12 Months
•  NYMEX Values per Month for the Forward 12 Months
•  NYMEX Graph for Natural Gas - 12 Month Average Price per Therm at the Louisiana Well-Head
PJM Electricity
•  PJM Graph for Electricity - 12 Month Average Peak Power Price
•  Local Cooling Degree Days*


Editor's Note

Up And Down

Week in Review for July 18 - July 24, 2014

For this seven day report period, energy prices dropped for the sixth straight week. The average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) fell 2.4% closing at $0.388/therm and the 12-month average price for peak power on the PJM fell 2%.

As you may recall, this past winter was brutally cold and energy demand spiked to meet the heating demand.  As a result of this winter's demand spike, energy prices spiked. From November 1, 2013 to March 31, 2014, NYMEX gas prices for the 12 month strip rose 27% while the peak power prices on the PJM rose by 27%. High demand created high prices. 

Conversely, so far this summer, we have not experienced the on-set of any sustained, brutally hot weather in most of the country. As a result, demand is low and energy prices have started to fall. Since June 12, 2014, the 12 month strip price for natural gas on NYMEX dropped 16% and the 12-month average price for peak power on the PJM dropped 13.6%.  Ultimately, the weather gets a lot of the credit for this downward trend just like the weather got the blame for the winter's price spike. 

Thanks to lack of any sustained heat waves and the record-high gas production coming out of the shale formations, the unused natural gas has been diverted from the power plants to the storage fields.  We are halfway through the injection season and we have cut the storage deficit in half.  This week the natural gas storage fields are running 23% below the five-year average. 

Although we still have a large storage deficit to address, industry analysts seem optimist that the caverns can be re-filled to 3,400 Bcf by November 1st.  Weather is the wild card. We still have to deal with the dog days of August and the hurricane season. This may be a good time to consider the early renewal strategy.