Energy News

July 30th, 2014

Low Electricity Demand a Result of Economic and Technological Changes

According to a Wall Street Journal article, electricity use no longer follows overall economic conditions, including GDP. Technological advances and government regulation have led to Americans using less energy.

American Electric Power Co., a Columbus, Ohio based power company saw customers starting to retract energy usage in early 2009 because of the recession. Executives assumed businesses and consumers were being conservative with usage and it would bounce back eventually. Five years later, electricity sales still haven’t reached the peak from 2008.

Historically, economic expansion meant expanding electricity sales. The EIA stated it, “no longer foresees any sustained period in which electricity sales will keep pace with GDP growth.”

For more, please read the WSJ article in which this information was derived from.

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July 30th, 2014

Where are the East Coast LNG Facilities?

Several liquefied natural gas (LNG) plants with up to 9 Bcf/day of combined export capacity will begin shipment from the United States in 2016. Exporting LNG from the US is based on the simple fact that natural gas is cheaper in the US than anywhere else in the world (see image below).

World LNG Prices

Cheniere Energy, who is constructing the Sabine Pass liquefaction plant, presents comparisons of current natural gas prices in LNG-importing regions to the effective price of US originated LNG based on the structure of their contracts (SeekingAlpha). The image below shows one of these price comparisons assuming a $4.00/MMBtu Henry Hub price. Delivered costs to Asian countries is about $11/MMBtu, and $9/MMBtu to European countries.

Cheniere Cost Comparisons

So far, 9 of the 13 proposed terminals in the United States are located on the Gulf Coast. Another two are off the coast of Oregon, one off the coast of Georgia and one Eastern location off the coast of Maryland. While the gulf coast region plants make the most sense for shipment to Asian countries, LNG facilities in the Northeast would make for an easier route to European countries.

As far as production goes, the Marcellus and Utica shale plays in the northeast have emerged as the largest and fastest growing in terms of production. Pipeline issues and a lack of capacity have hindered takeaway and production growth in both shale plays. It has also caused many producers to flare off natural gas.

If more LNG facilities, and therefore infrastructure, are built for take away from the eastern shale plays, it could provide a direct answer to the production surplus. Europe wishes to diversify its sources of natural gas in order to reduce dependence on Gazprom and constructing facilities to ship would benefit producers and communities alike in the northeast region.

UticaMarcellus

Marcellus and Utica Shale Plays. Courtesy of the EIA.

To read more, please view the following SeekingAlpha article here.

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July 25th, 2014

Executive Market Summary

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This report week’s 90 Bcf injection was larger than last year’s 43 Bcf injection and the five year injection average for the same week of 47 Bcf but it still did not meet expectations. Forecasts anticipated a 95-96 Bcf build and upon release of the report, the August natural gas futures contract increased 4 cents.

Net storage injections have totaled 1,397 since April 4 versus 1,080 Bcf for the same 16 weeks in 2013. These above average injections are a great help in making up for the deficit we created this winter.

Natural gas consumption decreased for the week mainly due to weather. Temperatures fell below normal for much of the eastern half of the United States. Mild temperatures are expected to continue for the next two weeks according to several sources, including John Kilduff, a partner at Again Capital LLC, a NY based hedge fund focusing on energy.

Production continues increasing overall – dry production hit a record high on Monday at 69.1 Bcf, according to the EIA. Genscape, a provider of real-time data and intelligence for commodity and energy markets, reports that dry production reached 70 Bcf for the first time Monday.

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July 18th, 2014

Executive Market Summary

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Natural gas storage injections continue increasing at a record pace. This week’s injection was 107 Bcf, exceeding expectations of 100 Bcf. This is the eighth out of nine consecutive weeks storage has come in at or above 100 Bcf. From the week ending on April 4 through the week ending on July 11, net storage injections have totaled 1,307 Bcf, versus 1,037 Bcf for the same 15 weeks in 2013 (EIA).

Cooler temperatures this week have also had a bearish effect on the market. A cold air mass came down from the arctic and dropped temperatures across the nation – mainly in the Midwest. Patrick Badgley, Platts’ North American natural gas editor, points out that because most of the country has experienced a mild summer – gas prices are taking a hit.

Storage remains 608 Bcf below last year’s levels and overall consumption rose this week by 1.9%. The cooler weather caused residential and commercial demand to increase slightly. Power burn also increased by 3.7% compared to last week.

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July 11th, 2014

Executive Market Summary

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Natural gas futures hit a six-month low yesterday. According to Tim Alford with Armored Wolf, price spikes are not expected to be as large or sustained as long because of the increase in production.  Record production continues to offset the natural gas storage deficit but even with the record injections, storage remains more than 20% less than last year’s levels.

For the first time in 8 straight weeks, the natural gas injection came in below 100 Bcf at 93 Bcf. Forecasts were calling for a 87 Bcf build which is more than last year’s 81 Bcf build and larger again than the five year injection average of 72 Bcf.

Total natural gas consumption fell this week by 1.5 Bcf/day thanks to a 1.6 Bcf/day decrease in power burn. Temperatures in the Northeast, Midwest and Southwest registered cooler temperatures which helped account for the decline.

There are 17 more weeks in the injection season which ends October 31. The EIA increased their forecast for end of October levels from 3,424 Bcf to 3,431 Bcf.

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July 11th, 2014

2014 Natural Gas Fast Facts

  • Natural gas futures hit a six-month low on Thursday, July 10, settling at $4.12/MMBtu – a 14% drop since June 12 (WSJ)
  • Extreme winter weather in January resulted in seven out of the 10 biggest demand days on record for the U.S. (Bentek)
  • The week ending January 10 posted a record-high withdrawal of 287 Bcf – the largest for the 20 years which data exists (EIA)
  • Natural Gas production hit a record 72 Bcf/day the in the first three months of 2014 (WSJ)
  • Since mid-May, gas inventories have risen 28% faster than the five-year average – see chart below (WSJ)
www.wsj.com

www.wsj.com

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July 3rd, 2014

Executive Market Summary

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Natural gas storage injections continue for the eighth week at or above 100 Bcf. This week’s 100 Bcf injection was above last year’s 75 Bcf injection and the five year injection average of 68 Bcf but failed to meet the forecasted predictions of 102 Bcf.

The demand for natural gas is in July expected to be lower than normal due to cooler temperatures. For more information on the weather, please see below.

Natural gas supply and production both increased overall. Supply increased at 0.1 Bcf/day for the third week in a row, landing at 73.4 Bcf/day. Total dry production also increased for the third week in a row by 0.1 Bcf/day.

Weather is a neutral market driver mainly because of the start of summer weather and uncertainty around the El Nino event. An El Nino event is correlated with cooler than normal temperatures and a suppressed hurricane season. WSI predicts below normal temperatures July through September for the north-central and northeastern United States. Warmer than normal temperatures are expected in the southeast, but if the El Nino occurs it has the potential to cool down that region of the US.

Please note the natural gas market closed at noon today in anticipation for the Independence Day holiday. Have a great weekend!

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July 3rd, 2014

Wyoming vs. The EPA

The newly overturned EPA standards seek to cut carbon pollution created by power plants by an average of 30% by 2030. The new emission standards will accelerate the United State’s transition to using alternative sources of energy for electricity generation. Coal is considered the dirtiest fossil fuel and since 202, 297 coal-fired units at power plants have already retired or are scheduled for retirement.

Wyoming produces approximately 40% of the coal for our nation and, similarly, accounts for the most carbon per capita in the US. While the United States still relies on coal for nearly 40% of it’s electricity needs, Wyoming governor, Matt Mead, believes the emissions standards will hurt not only his state but also the rest of the nation. Because coal is so prevalent in Wyoming, it obviously provides quite a number of jobs to its citizens. They have vowed to keep coal as an ‘economic bedrock’ even if it means shipping overseas.

For more information please click here.

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July 3rd, 2014

North Dakota Gas-Flaring

North Dakota, where you can find the oil and natural gas-rich Bakken Shale, lacks adequate infrastructure. This means any natural gas that isn’t captured is flared off and in April alone, these wells burned off 10.3 Bcf of natural gas - equating to nearly $50 million dollars. Flaring off natural gas degrades air quality and energy companies lose out on revenue though many companies make the money back in the amount of crude oil they generate.

On Tuesday, a new set of restrictions were introduced. The North Dakota Industrial Commission, which regulates and promotes the state’s oil industry, is now requiring oil producers to abide by production allowances that limit flaring at new and existing wells. The guidelines go into effect on September 30 and set targets for flaring at 23% of all gas produced by January 2015. After, the target is reduced to flaring only 20% of natural gas produced by 2020.

For more detail on this matter please visit the WSJ articles here and here.

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June 27th, 2014

Executive Market Summary

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Weather Services International (WSI) expects no change to the quiet tropical season. This year may likely be the first since 2009 we go into July without one named storm. Regarding temperatures, WSI still expects below normal temperatures across the north-central and northeastern states. Above normal temperatures are expected in the Southeast US and western states. Click image below for the most recent forecast for July – September.

Natural gas storage increased by triple digits for the seventh consecutive week. The injection was 110 Bcf, above the expectations of approximately 104 Bcf. This injection was larger than the 81 Bcf 5-year injection average and larger than last year’s injection of 94 Bcf.

Chris Kostas, with Energy Security Analysis, Inc. (ESAI), predicts natural gas demand in July will be below average due to the cooler-than-normal temperatures expected over most of the country. This should result in relatively soft energy prices – particularly for the Northeast and Midwest markets.

Natural gas production is increasing in the three major tight oil production areas. The Eagle Ford, Permian Basin and Bakken Shale are partially responsible for natural gas production increasing by 5% overall so far in 2014. Since 2011, gas production in these three regions increased by 88%. Natural gas production hit a record high of 68.5 Bcf on Saturday.

Natural gas storage remains low compared to the one and five year averages but the 100+ Bcf builds are helping decrease the deficit. Overall natural gas demand surpassed production. Consumption rose 1.8%- driven by increases in the industrial and power burn sectors.

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