Obama details budget plan; debt payments seen tripling. President Obama yesterday unveiled his $3.9T budget for fiscal-year 2015, confirming proposals that had already been flagged in advance. These include tax hikes for the rich and energy companies, and increased spending on infrastructure and education. As expected, Republicans weren’t too impressed with the plans. Perhaps more interestingly, the government expects debt interest payments to more than triple over the next decade to $886B, due to higher interest rates and increasing debt.
U.S. Household Net Worth Hits Record. Americans’ wealth reached an inflation-adjusted record last year—$80.7 trillion—thanks to a surging stock market and rising home values, laying the groundwork for stronger economic growth (www.wsj.com)
Eurozone business activity better than initially estimated. Eurozone services PMI increased to 52.6 (flash 51.7) in February from 51.6 in January, while composite output rose to 53.3 (flash 52.7) from 52.9. The data suggests that eurozone GDP is on track to grow 0.4-0.5% in Q1, says Markit, which would be the “best performance for three years.” Meanwhile, retail sales blew past expectations with a rise of 1.6% on month in January – the largest increase since November 2001 – after falling 1.3% in December.
China: Where 7.5% can be 7.2% or 7.3%. China’s Finance Minister Lou Jiwei has indicated that the country’s 2014 GDP growth goal of 7.5% is not a cast iron target, saying that 7.2% or 7.3% would also “count.” What’s more important is employment, Lou said – the government aims to create 11M jobs this year. “This flexibility allows them to flag an encouraging number to the business community but at the same time to feel free not to react with stimulus and more debt if it’s missed a bit,” says Credit Agricole economist Dariusz Kowalczyk.Read More
Natural Gas Storage Facts
EIA (Energy Information Administration) reported a net withdrawal of 152 Bcf (billion cubic feet) for the week ending February 28, 2014.
Inventories are at 1,196 Bcf, which is down 43.2% or 908 Bcf from last year and 758 Bcf below the 5-year average or 38.8%.
With another wave of cold weather, natural gas spot prices rose during the report week (Wednesday, February 26, through Wednesday, March 5) at most locations. The Henry Hub spot price traded yesterday at $6.41 per million British thermal units (MMBtu), a $1.57/MMBtu increase for the report week. It rose to $7.90/MMBtu on Tuesday, March 4, before declining yesterday.
At the New York Mercantile Exchange (Nymex), the April 2014 contract traded yesterday at $4.523/MMBtu, a 1.3 cent decrease for the report week. The April contract took over as the front month contract on Thursday, February 27.
Working natural gas in storage fell to 1,196 billion cubic feet (Bcf) as of Friday, February 28, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net storage withdrawal of 152 Bcf for the week resulted in storage levels 43.2% below year-ago levels and 38.8% below the 5-year average.
The total rig count was 1,769, up 12 from a year ago.The natural gas rotary rig count totaled 335 as of February 28, which represents a decline of 7 rigs from the previous week, and 85 rigs from the same time last year, according to data from Baker Hughes Inc. Oil rigs rose for the third week in a row, by 5 units to 1,430, which is 97 greater than last year at this time.
The weekly average natural gas plant liquids composite price decreased for the fourth week in a row this week (covering February 24 through February 28), by 11.2%, and is now at $10.65/MMBtu. This is more than $2.00/MMBtu less than at the end of January, when the composite price was $12.69/MMBtu. This week, prices of ethane and propane, the two largest components of the NGL composite price, decreased by 14.4% and 18.0%, respectively. Butane, isobutene, and natural gasoline declined by 6.6%, 5.2%, and 0.2%, respectively.
12/24-Month Strip (NYMEX) Price
12 Month Strip 24 Month Strip
$4.678 MMBtu $4.407 MMBtuRead More
Crude Oil Price: $101.45
WTI Falls for Third Day as U.S. Crude Stockpiles Gain
West Texas Intermediate declined for a third day after U.S. crude inventories increased while tension in Ukraine continued to ease. Brent was little changed.
Futures dropped as much as 0.9 percent in New York to their lowest intraday level since Feb. 18. Crude stockpiles gained for a seventh week while supplies at Cushing in Oklahoma, the delivery point for WTI contracts, slid to the lowest level in two years with the opening of a new pipeline. European Union leaders quarreled over how to tame Russia after its military moves in Ukraine.
“Crude has been falling since Monday as the geo-political risk drops off,” Thina Saltvedt, an analyst at Oslo-based Nordea Markets, said by phone. “The Ukraine risk premium has disappeared for now as we are at least getting dialogue between Russia and the West.”
WTI for April delivery dropped as much as 89 cents to $100.56 a barrel in electronic trading on the New York Mercantile Exchange and was at $100.67 as of 1:25 p.m. London time. The contract lost $1.88 to $101.45 yesterday, the biggest drop in two months. The volume of all futures traded was about 36 percent more than the 100-day average.
Brent for April settlement was down 30 cents at $107.46 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $6.80 to WTI on ICE. The spread ended yesterday’s session at $6.31, widening for the first time in seven days.
A summit in Brussels today started with eastern European countries calling for a tough line on the Kremlin and western countries offering Russia more time to pull back its forces in Crimea before imposing sanctions.
U.S. Secretary of State John Kerry and Russia’s Foreign Minister Sergei Lavrov met in Paris in their first face-to-face encounter since Ukrainian president Viktor Yanukovych fled his country during last month’s popular uprising.
The International Energy Agency said it’s “constantly monitoring” oil and gas markets amid the crisis in Ukraine and that the current situation doesn’t call for an IEA response.
WTI has slid 1.5 percent this week, poised for the first decline in eight weeks as U.S. crude supplies climbed to the highest level since December.
Distillate stockpiles increased by 1.41 million barrels in the seven days through Feb. 28, said the EIA, the Energy Department’s statistical arm. They were projected to decline by 1 million barrels, according to the median estimate of nine analysts surveyed by Bloomberg.
“The drop in the price has been magnified amid growing U.S. inventories and decreasing geopolitical risks,” said Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul.
Stockpiles at Cushing, the nation’s largest oil-storage center, slid by 2.66 million barrels to 32.1 million, the EIA reported. TransCanada Corp. began moving crude from the hub to the Texas Gulf Coast in January via the southern portion of its Keystone XL pipeline.
WTI is extending losses after breaching technical support, according to data compiled by Bloomberg. Futures yesterday settled outside the lower boundary of an upward-sloping trend channel going back to mid-January. Investors typically sell contracts when chart support fails.
Reg Down: $0.01874
Reg Up: $0.01806
NYC LBMP: $0.178355
AEP GEN HUB LMP: $0.06569
Mass. Boston Day Ahead LMP: $0.20322
Illinois Hub Hourly LMP: $(0.01546)Read More
U.S. Issues El Nino Watch Saying Ocean Warming May Occur
An El Nino watch has been issued by the U.S. Climate Prediction Center, warning of the possible development of the weather-altering event that can bring rain to California and South America and raise winter temperatures in the U.S. Northeast and Midwest.
There’s a 52 percent chance that the Pacific Ocean will warm enough to trigger an El Nino late this summer or in early fall, said Michelle L’Heureux, a climate scientist at the Climate Prediction Center in College Park, Maryland.
“We have increased our probabilities, not a whole lot, but just enough that we feel we need to start drawing attention to the situation,” L’Heureux said in an interview. “There are still dominoes that have to fall here. This is not a guarantee, but certainly we’re issuing this watch so folks have a heads-up.”
Rubber, sugar, coffee, and natural gas are among the commodities that can fluctuate because of an El Nino, which usually occurs every three to five years and can last months. The phenomenon often touches off warmer winters across the northern U.S., heavier rains from southern Brazil to Argentina and drier conditions across southeast Asia and Indonesia. It also can lead to a calmer Atlantic hurricane season and a stormier winter in the U.S. South.
An El Nino in 1982-83 caused $8.1 billion in damage worldwide and prompted efforts to better monitor the ocean warming, according to the National Oceanic & Atmospheric Administration.
“On the precipitation side of it, you can have a more active winter storm track coming into California, and if you get a strong mode then you get a real good storm track coming across the southern U.S., too,” said Joel Widenor, a meteorologist at Commodity Weather Group LLC in Bethesda, Maryland.
California is currently in the grips of a drought that has left reservoirs dry.
The Australian Bureau of Meteorology noted the warming trend in the Pacific last month. An El Nino means less rain across eastern Australia through June to November, the bureau said.
The last El Nino occurred in 2009 to 2010, and since then the other two phases of the cycle, a cooling called La Nina and a period of neutral conditions, have held sway, the climate center said.
The decision to issue the watch came because the waters under the Pacific’s surface have grown warmer in the last several weeks. Winds pile up warm water in the western Pacific and then it sloshes back beneath the surface toward the east and the coast of South America. This is called a Kelvin Wave, L’Heureux said.
“Kelvin Waves are a necessary condition for El Nino but they’re not necessarily sufficient, meaning we have still yet to see what sort of impact this will have,” she said.
There is more to an El Nino than just water temperature, she said. The ocean warming has to be tied to changes in the atmosphere, which set off the global shifts in weather patterns. The entire process is referred to as the El Nino Southern Oscillation, or ENSO.
Many of the impacts of an El Nino depend on its strength, and L’Heureux said predictions of intensity are harder to make. It may be June or July before researchers get an idea.
There is also a possibility the pattern won’t develop at all, she said. In 2012, the Pacific began to warm, while the atmosphere above the ocean failed to respond. The El Nino didn’t occur.
Predictions can go awry because of the “spring barrier,” the time between March and May when computer models often have trouble making sense of what is happening in the Pacific, L’Heureux said.
During the last El Nino, 12.6 inches (32 centimeters) of snow fell on Dallas in February 2010 and 32.1 inches at Washington’s Reagan National Airport, according to National Weather Servicerecords. Temperatures were 1.7 degrees higher than normal in Boston and 6 degrees higher in Portland, Maine, that month.
El Nino can also increase wind shear across the tropical Atlantic during the June to November hurricane season, reducing the chances of a devastating storm. The Gulf of Mexico is home to about 6 percent of U.S. natural gas output, 23 percent of oil production and more than 40 percent of petroleum refining capacity. The 2009 season was the quietest in a decade.
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