Executive Market Summary

December 15th, 2014

Executive Market Summary

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Although the storage withdrawal this week was larger than expected, it was still well below historical averages. The 51 Bcf withdrawal was 21 Bcf lower than the five year average withdrawal of 72 Bcf and 41 Bcf lower than last year’s withdrawal of 92 Bcf.

According to Centerpoint, expectations for next week’s withdrawal are currently around 60 Bcf which is smaller than the 256 Bcf (record) withdrawal last year and the 157 Bcf five year average.

The National Weather Service forecast shows greater than a 50% chance of above normal temperatures throughout the US and NOAA’s 8-14 day temperature forecast shows above normal temperatures across the entire nation.

Overall, prices have remained generally flat at most locations.

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December 7th, 2014

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The November cold snap led to larger than average withdrawals from storage inventories. Natural gas storage fell a total of 161 Bcf the first four weeks of November – the largest withdrawal for that period in more than 10 years. This was largely driven by the 162 Bcf withdrawal for the week ending November 21.

Change in Working Gas Inventories

Regardless of the November withdrawals, mild weather continues to outweigh most of the bullish factors. WSI, Platts and NOAA are all forecasting above average temperatures through mid-December across the entire country.

The warmer weather helped bring in a smaller than expected net withdrawal. The net withdrawal for the week ending November 28 was 22 Bcf – 28 Bcf lower than the five year average and 119 Bcf lower than last year’s withdrawal.

Production continues setting records. According to the EIA, production was more than 71 Bcf/day for all days in the report week and 2% higher compared to the previous week.

 

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November 24th, 2014

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The southern US saw warmer temperatures that lasted through much of the weekend but the northeast is expected to experience colder than average weather through this week. Predictions vary on the length of time the cooler weather will linger and gas futures have jumped to a nearly five month high on concerns that another brutal winter could strain our natural gas supplies. According to Teri Viswanath, a gas strategist at BNP Paribas, this is the most volatile start of the season we have experienced (WSJ).

The first withdrawal of the season occurred on Thursday. The number came in at -17 Bcf, about 5 Bcf more than expectations of a -12 Bcf withdrawal.  Forecasts predict anywhere from a 147 Bcf to 160 Bcf draw for this report week. It could be a record storage withdrawal for the third week of November. Please see below for the largest November withdrawals:

largest Nov Withdrawals

Consumption outpaced supply again this past report week and consumption in the northeast reached its third highest recorded November level on Wednesday. According to the EIA, mid-November demand for natural gas in the Northeast normally ranges from 15 to 17 Bcf/day. Since November 13, when the cold spell began, demand has remained above 18 Bcf/day.

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November 17th, 2014

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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

Executive Market Summary

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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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