Executive Market Summary

October 27th, 2014

Executive Summary

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An updated winter weather forecast was released and below average temperatures are expected in many parts of the south central and south eastern US. The National Oceanic and Atmospheric Administration is predicting above-average temperatures in the western US, Alaska, Hawaii and New England and the rest of the country falls into the “equal chance” category. This means these areas have an equal chance for above-, near-, or below-normal temperatures.

Although below average temperatures are expected in the south central and south eastern US, a repeat of last year’s extreme winter is unlikely. Chris Kostas with ESAI Power LLC expects weather-related demand and, in turn, gas prices to remain soft through December.

Gas production has been robust in 2014 hitting several new production records. The month-to-date production average is now 69.7 Bcf/day which is 5.2 Bcf/day higher than October 2013. According to the EIA, the 336 Bcf difference in storage from last year could be narrowed by 139 Bcf by the end of October.

Storage was slightly disappointing last report week with the expected injection at 96 Bcf and the actual injection only being 94. It was the 27th consecutive week in which the storage build exceeded the five year average injection (CenterPoint) and expectations for this week’s report is about 90 Bcf.

 

 

Weather side note: California is experiencing a record-setting drought and there is still a 67% chance that an El Nino will develop by the end of the year, though it is expected to be weak. An El Nino is a complex series of climatic changes affecting the equatorial Pacific region and beyond every few years. El Nino episodes often pull more moisture into California over the winter months.

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October 17th, 2014

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Winter is approaching without signs of colder-than-normal weather. Forecasters have been predicting above-average temperatures covering much of the country through the end of October (WSJ), thus delaying the usual heating demand and keeping natural gas prices relatively low.  Last year’s average temperatures this early had the same effect, though the late push of record cold temps late into last winter drove up the market to multi-year highs.  Stay tuned for future forecasts depicting late winter weather.

Most predictions for last week’s storage injection were roughly 92 Bcf, which proved to be relatively accurate.  The actual injection for the report week stood at 94 Bcf, larger than last year’s 79 Bcf build for the same week and the five year injection rate of 78 Bcf.  Natural gas storage is now within 10% of last year’s and the 5-year average for the first time all year. Three weeks remain in the injection season.

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October 10th, 2014

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The EIA released the revised version of the Short-Term Energy Outlook. In it, the EIA projects that average US expenditures for energy will decrease this winter heating season (October 1 through March 31) compared to last winter. Additionally, using forecasts from the National Oceanic and Atmospheric Administration, the EIA predicts the number of heating degree days – a measure of heating demand – will fall 12 percent this year.

Last week’s storage injection of 105 Bcf didn’t quite meet the predictions for 109 Bcf and the market reacted by rising 4 cents. Regardless, this was the second straight week of triple digit injections and two weeks remain where Gexa has predicted 100+ injections. There are four weeks left in injection season but don’t forget that injections have continued into November for the past 11 years.

Storage levels have yet to breach the 10% deficit from last year.

For more information, please visit the EIA’s Short Term Energy Outlook.

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October 3rd, 2014

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This report week’s natural gas injection was 112 Bcf. The report beat market expectations (around 105-107 Bcf) as well as last year’s 99 Bcf injection and the five year injection average of 85 Bcf. Five weeks remain in the injection season but injections have run into November the past 11 years. In order to reach the EIA’s projection of 3,477 Bcf in storage by the end of injection season, injections will need to meet or beat 75 Bcf/week.

Gexa’s prediction of 100+ Bcf injections continues for three more weeks. This would definitely help reach the end of season expectations.

We still remain 10% below storage levels from last year. Until that gap is minimized, it will continue to have a bullish effect on the market – mainly due to uncertainty. Consumption is expected to grow 1.8% in 2014 overall and the GDP’s 4.6% growth in Q2 reveals an increased demand for energy.

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September 26th, 2014

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WSI released the latest forecast for the October through December months. Mild weather has been prevalent across the United States, especially compared against the temperatures we would normally see for this time of year. Below normal temperatures are estimated to continue through the fall season for the central US and above normal temperatures are expected on both coasts. WSI states that while it is still early, the greatest risk for cold weather will occur during the back half of the winter in the Eastern US. Because of the forecasts, it is estimated that weather-related energy demand will remain soft through the end of the gas injection season. Please see the chart below.

The storage injection this report week was 97 Bcf – in line with the expectations from 88 to 101 Bcf. This surpassed last year’s 81 Bcf injection and the five year injection rate of 79 Bcf. Gexa estimated last week that injections would meet or surpass 100 Bcf the next five weeks. That leaves four weeks of 100+ Bcf injections. This weeks 97 Bcf injection didn’t meet the 100 Bcf injection but did come close. The EIA predicts 3,477 Bcf in storage at the end of injection season while Gexa is predicting 3,600 Bcf. Six weeks remain in the injection season.

Overall natural gas demand was down 4.9% thanks to the weather.

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September 19th, 2014

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For this report week, temperatures (in the lower 48 states) averaged 71.7 degrees (EIA). The mild weather persists which is good for production numbers, storage injections and demand but there is a possibility it may not last much longer. Preliminary reports for a winter forecast have come out and many like Commodity Weather Group and WeatherBELL Analytics are preparing for the possibility of severe winter weather again this year. The polar vortex in 2013 resulted in the coldest January through April for the Eastern US since 1993 (National Climatic Data Center).

Our storage injections remain strong. The 90 Bcf injection this week was in line with market expectations. Injections continue to surpass both the one and five year averages. Only seven weeks remain in the injection season but if the weather remains mild, we could see injections through at least the first few weeks into November. As state above, that is still up in the air until an official winter forecast comes out.

The EIA predicts storage levels to be at 3,477 Bcf by the end of October, which will require an average injection of 84 Bcf each week. The deficit continues to decrease from last year’s brutal winter but storage still remains 14% below last year.

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September 11th, 2014

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There hasn’t been much of a change in factors affecting the market since last week. Weather remains relatively mild. Most of the northeast is experiencing fall-like weather where cooler temperatures came a little earlier than usual. Production remains high – helping us fill the deficit from this winter. The storage is now more than 50% fuller from when the injection season began in April. From the week ending September 5, injections have totaled 1,979 Bcf versus 1,554 Bcf for the same 23 weeks in 2013 (EIA). This report week’s injection surpassed the market expectations and both the one and five year averages. We are left with 8 weeks in the injection season to continue filling the gap from last year’s harsh winter.

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September 5th, 2014

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The overall mild summer remains a large driver on gas costs, especially as record production overwhelms demand. According to a Wall Street Journal article, WSI is predicting two cool weather patterns to hit the country in the next two weeks and the central US is expected to experience fall-like weather. WSI’s forecast for September indicates moderate temperatures for most regions.

The natural gas storage injection of 79 Bcf was above expectations of 74 Bcf which helped gas prices fall following the release of the report. This week’s injection also continued the trend of being larger than both the one and five year average injections. Nine weeks remain in the injection season.

 

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August 28th, 2014

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August has been a relatively mild month across most of the central and eastern US. We are quickly approaching September and forecasts indicate cooler-than-normal temperatures for most of the north-central US. WSI predicts this same pattern for a majority of the fall and indicates that the data needed to make a successful winter forecast is not yet available. The first official winter forecast will be available in September.

The natural gas injection was 75 Bcf, below expectations of 76 Bcf, causing prices to rise briefly immediately following the report. Some analysts predicted up to a 78 – 80 Bcf injection. 2014 has been the strongest injection season in the past six years but storage still remains 15.7% below the levels last year.

High production numbers have assisted in reducing the storage deficit due to extreme weather by more than 50% since the beginning of injection season. Forecasts indicate strong injection numbers will continue and the EIA predicts storage to sit at 3,460 Bcf by the end of injection season (October 31).

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August 22nd, 2014

Executive Market Summary

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Overall mild weather this summer has helped US natural gas production achieve record levels, curtail natural gas demand in the power sector and support large, ongoing natural gas injections.

Gas production continues to break records. US dry natural gas production hit a high of 69.3 Bcf on July 30 and reached the same level again a few times this month.

NOAA is predicting that weather will remain mild in the Midwest and Northeast portions of the United States. The Southern part of the nation and California area can expect above normal temperatures through the end of the month.

Weather

This report week’s injection was 88 Bcf – surpassing the expectation of 82 Bcf as well as last year’s 58 Bcf build and the 5-year average build of 48 Bcf. This was the 18th straight injection beating the 5-year average injections. Again, the mild weather is helping support the large injections we continue seeing each week. Bentek Energy’s injection forecast for the next three weeks is 87, 82 and 76 Bcf.

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