Executive Market Summary

November 17th, 2014

Executive Market Summary

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The cold temperatures we saw last week are expected to continue which will likely result in more natural gas consumption. The cold weather over the eastern three-fourths of the country is expected to linger through the majority of this week but normal temperatures are expected to take hold from the plains down to Texas around the middle of the week.

According to Bentek Energy, residential and commercial consumption hit 36.3 Bcf last Wednesday and then 42.1 Bcf on Thursday. For the first time since mid-April consumption outpaced supply. See chart below:

Resi Comm Consumption

In the latest revision of the EIA’s Short Term Energy Outlook, natural gas production numbers for 2014 are set to outpace what was produced in 2013 and then again in 2015.

The natural gas injection came in at 40 Bcf, above expectations of 38 Bcf, the five-year average of 16 Bcf and last year’s 22 Bcf injection. Forecasts estimate this will be the last injection of the year/season. If this rings true, we will begin depleting the 3,611 Bcf we have in storage. Storage still sits below the one and five year average by more than 200 Bcf.

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November 10th, 2014

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Short Term
Winter weather finally creeps in. This weekend the northeast experienced Winter Storm Warnings and Winter Weather Advisories.  New York and New England even received some snow. According to the EIA and CenterPoint, last week residential and commercial natural gas consumption rose to 30.5 Bcf and electricity consumption rose 0.5% to 69,114 GWh. The market responded to the introduction of cooler weather last week. Shell reports that natural gas futures spiked nearly 20%, an early November figure we have not seen since 2002.
The net injection last Thursday came in at 91 Bcf with expectations of 87 Bcf. This injection was 49 Bcf larger than the five year injection average and 56 Bcf larger than this week last year. 
Injection season wrapped up at the end of October. Thursday’s injection brought the total to a record 2,749 Bcf added for 2014 (April 1 – October 31). Inventories began at 826 Bcf, the lowest total inventory since April 2003, but concluded with 28 straight weeks of injections exceeding the 5-year-average according to the EIA. Despite last winter’s strain on natural gas inventories, record high production, a mild summer and early fall temperatures attributed to reduced volume of gas used for electricity generation.
These injections may not stop, either. For the past eleven years, injections have continued into November. In two of those eleven years, storage levels were greater at the end of November than at the end of October. If injections continue, we could see a similar trend this month.
Long Term
The EIA released an analysis over the effect of increased levels of early LNG exports on the US energy market. In it, the EIA predicts that expenditures for natural gas and electricity will increase modestly. On average, natural gas bills are estimated to increase between 1%  to 8% (depending on the export scenario and case) and electricity bills could increase up to 3% (again, depending on the scenario and case). To read the entire EIA analysis, please click here.
Multiple pipeline expansion projects are underway to increase takeaway from the Marcellus Shale. One pipeline began operation and another is expected to come online this month. Columbia’s West Side Project began partial service and will transport 0.4 Bcf/d from western PA and WV to the Gulf. The TEAM 2014 project is expected to be fully operational this month linking gas from western Pennsylvania and West Virginia with the northeast, midwest, and south.
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November 3rd, 2014

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Halloween weekend was a cool one for most of the eastern and central regions of the US. Temperatures are expected to warm back up across the nation come Tuesday. According to CenterPoint Energy, above normal temperatures are expected to continue across the northeast through November.

One week remains in injection season although injections have continued into November for the past 11 years. In order to reach the EIA’s end-of-storage season estimate of 3,532 Bcf, a 52 Bcf injection is required this next report week.

The net injection last Thursday came in at market expectations of 87 Bcf, which is 28 Bcf larger than the five year injection average and 42 Bcf larger than last year’s injection.

A record 2,658 Bcf of natural gas has been added to storage thus far in the 2014 injection season. Over the same period last year, total injections reached only 2,074 Bcf.

Long Term

The EIA released an analysis over the effect of increased levels of LNG exports on the US energy market. In it, the EIA predicts that expenditures for natural gas and electricity will increase modestly. On average, natural gas bills will increase 1 to 8% (depending on the export scenario and case) and electricity bills will remain flat or increase up to 3% (again, depending on the scenario and case). To read the entire EIA analysis, please click here.

Multiple pipeline expansion projects are underway to increase takeaway from the Marcellus Shale. The Constitution Pipeline, Tennessee pipeline and the AIM pipeline should total between 1.6 and 2.8 Bcf/day. For a list of pipeline projects that are in the works, please view the Excel spreadsheet from the EIA here:  http://www.eia.gov/todayinenergy/images/2014.10.15/EIA%20pipeline%20table.xls.

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October 27th, 2014

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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

Executive Market Summary

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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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