Executive Market Summary

March 30th, 2015

Executive Market Summary

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The 12 Bcf storage injection on Thursday was the first injection of the season.  This injection compares quite bearishly against the 56 Bcf withdrawal from last year and the five year average withdrawal of 19 Bcf. Storage currently sits 63.6% or 575 Bcf higher than last year and 11.6% or 194 lower than the five year average.

Weather remains normal to above normal in most parts of the United States through April 5. The Northeast is expected to see some cooler than normal temperatures before shifting warmer.

The Mercury Air Toxics Standard (MATS) goes into effect next month. Demand for power is averaging 3.8 Bcf/day higher than in March 2014. This increase is attributed to coal to gas switching due to low gas prices and the MATS compliance deadline. Data from Bentek shows that 6,400 MW of coal generation will be retiring in April.

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March 23rd, 2015

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Temperatures were warmer than normal last week in the lower 48 states; on average temperatures were .07 degrees warmer than the 30 year average. Cooler than normal temps have been forecast for the Midwest and Eastern regions for the next few weeks and Thursday night/Friday saw wintry precipitation in the Algonquin region. However, warmer weather continues to be the expectation as Spring begins.

Thursday’s 45 Bcf pull from natural gas storage which was 4 Bcf below market expectations ended a three week run of above-normal storage withdrawals. We currently sit almost 53% higher than last year’s levels but remain 13% less than the five year average.

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March 16th, 2015

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Temperatures were warmer than normal last week and will continue that way through the end of this week. Thursday night/Friday temperatures are expected to fall back below normal in the Northeast for at least a few days. The warmer weather has caused pricing to fall and indicate that spring weather is finally approaching.

Thursday’s 198 Bcf pull from natural gas marked the third week of above-normal storage withdrawals. We currently sit almost 47% higher than last year’s levels but remain 13% less than the five year average.  Production continues increasing and consumption does as well. In the EIA’s Short Term Energy Outlook, published on March 10, 2015, predictions for natural gas consumption or demand increases to 75.7 Bcf/day in 2015 from 73.5 Bcf/day in 2014. The growth in demand is largely driven by demand in industrial and power sectors.

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March 9th, 2015

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On Thursday, the EIA reported a 228 Bcf storage withdrawal which was in line with expectations. On the other hand, it was a record storage withdrawal for the reference week – surpassing the previous record draw of 176 Bcf in 2003. Early forecasts for next week’s storage withdrawal are around 200 Bcf which would register more than both last years and the five year average withdrawal.

The weather in the eastern two thirds of the country the last three weeks has been much cooler than normal. According to the EIA, temperatures in the lower 48 states averaged 28.3 degrees for the storage report week, 10.9 degrees cooler than the 30-year temperature and 11.3 degrees cooler than the average temperature during the same week last year. The weather combined with structural change has been a large driver for an increase in power burn (the use of natural gas for power generation). Power burn is also increasing due to an increased amount of natural gas generation capacity coming online and relatively low natural gas prices.

Average Daily Power Burn

According to AccuWeather and CenterPoint, warmth from the west will begin heading eastward finally warming things up this week. This weather pattern will bring the highest weekly temperatures since last December for many parts of the Midwest and East. After this week, though, there is a chance for below normal temperatures to reappear in the East.

ITR Economics is predicting that the US economy will soften throughout 2015. The Purchasing Managers Index (PMI) 1/12 rate of change signals slower growth in the economy that will persist through the rest of the year.

Information compiled from: EIA, CenterPoint, AccuWeather, NOAA, Bentek and ITR Economics.

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March 2nd, 2015

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Last week’s storage report came in well below market expectations. The actual withdrawal of 219 Bcf on Thursday caused the market to drop when predictions for a 239 Bcf withdrawal were not met. Two weeks ago storage surpassed the five year average for the first time since November 2013. That was short lived as we are back under the five year average by 1.5% or 30 Bcf but still remain 576 Bcf or 42.3% higher than last year’s storage number.

While weather is expected to remain cooler than normal this week, we shouldn’t see temperatures quite like the two weeks prior. The cooler temperatures have reflected on both storage withdrawals and natural gas consumption or demand for heating. US natural gas consumption remains at high levels – averaging 111.6 Bcf/day for the week ending February 20. Additionally, heating degree days (a measure of how cold a location is over a period of time relative to a base temperature, usually 65 degrees Fahrenheit) from January 1 through February 20 are about 11% more than normal.

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February 23rd, 2015

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The widespread cold seen last week is expected to continue this week and next. As seen in the weather chart below, the eastern three fourths of the US will be cooler than normal through late February and early March.

Weather

Because of the cold, natural gas demand in the northeast hit 43.1 Bcf last Monday, the highest level in Bentek’s 10-year history. According to the EIA, this demand exceeded the previous high set during the 2014 polar vortex by 1.2 Bcf in January 2014. These demand spikes also put constraints on pipelines and led to price spikes. See chart below for regional gas prices this winter.

Regional Gas Prices

Last week’s natural gas storage withdrawal of 111 Bcf was larger than expectations of 105-109 Bcf. Storage is currently 678 Bcf above last year’s level and for the first time since November 2013, storage exceeds the five year average by 85 Bcf. This is not expected to last as early estimates for this week’s withdrawal are 240 Bcf and the following weeks report is also expected to exceed 200 Bcf. These would exceed last years and the five year average withdrawal by more than 100 Bcf (EIA, CenterPoint, Platts Gas Daily).

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February 16th, 2015

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On February 6, the Henry Hub spot price settled at $2.55/MMbtu – the lowest level since June 2012. Prices have since risen but are still very low. Strong production, lower than average storage withdrawals, and above normal temperatures in the west have helped contributed to this year’s low prices.

Sporadic cooler-than-average weather in the northeast has been offset by the factors listed above. Below normal temperatures in the eastern half of the country is expected through February 22, but weather, at least for now, has had a neutral effect on pricing.

WEATHER

The storage withdrawal came in at 160 Bcf, 6 Bcf less than market expectations. Storage sits 542 Bcf more than last year’s levels at 2,268 Bcf and has ALMOST caught up to the five year average of 2,279 Bcf. An early projection for this week’s storage withdrawal is about 110 Bcf.

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February 9th, 2015

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US natural gas storage fell 115 Bcf last report week (Thursday, February 5). Analysts were expecting up to a 118 Bcf pull, so this fell below those expectations. Storage now sits 468 Bcf or 23.9% higher than the same time last year and only 29 Bcf or 1.2% below the 5-year average.  Early expectations for this week’s withdrawal are coming in at about 170 Bcf due to the cold temperatures two weeks ago.

Above normal conditions are expected for the western two thirds of the United States and normal conditions are expected across the eastern third. The Northeast is slated to be the only region to expect below normal temperatures.

According to Aaron Calder, a senior market analyst at Gelber and Associates, the current market is being dictated by production. The current natural gas market is oversupplied by about 1 Bcf/day and production is outstripping demand (Platts Gas Daily). Temperatures will need to drop significantly below normal to spur demand and drive the market up.

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February 2nd, 2015

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12 Month Strip, Friday, January 30 @ 1:15 PM:

12-Month Strip

 

 

Natural gas in storage fell by 94 Bcf to 2,543 Bcf. Storage numbers are now 14.6% or 324 Bcf above last year and 3% or 79 Bcf below the five year average. Analysts were expecting anywhere from 102 to 106 Bcf withdrawal and when the report was released the price for March natural gas futures decreased 11 cents.

New pipeline construction in the northeast will supply about 1 Bcf per day to the New York City area. This will alleviate some congestion issues there.

Cold weather returned late in January with below-normal temperatures across the eastern two thirds of the US. The cooler weather should continue until mid-February when temperatures creep back up as a result of a large warming system expected to develop.

Power burn (natural gas consumed in electric generation) has increased at record levels thus far in 2015. During the first 28 days of January, power burn was more than 6% higher than the same period in 2014 and 16% higher than the five year average. Power burn growth is strongest in Texas.

Contributing to the growth of power burn is an increased share of natural gas-fired electricity generation coupled with low natural gas prices. From January to November 2014, 66 power plant units (total capacity of 3,787 MW) retired in 19 states. The primary generation fuels for these plants were coal and petroleum liquids. While those were retiring, 300 utility scale generating units (total capacity of 9,656 MW) were brought online – a majority of which were natural gas fired units.

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January 26th, 2015

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Although last week’s storage report was the second largest this year, it came in below market expectations of 222-226 Bcf. At 216 Bcf, the withdrawal was larger than last year’s 133 Bcf withdrawal and the five year average withdrawal of 176 Bcf. Early estimations for this week’s storage withdrawal are at about 100 Bcf due to the relatively mild weather last week.

Forecasts show that a cold weather pattern will develop this week across the central and eastern US which will eventually migrate westward. According to WSI, if February and March trend cooler than usual, the natural gas market, coupled with lowering coal capacity, could be much tighter this spring than previously expected.

Two pipeline expansions were completed in 2014 adding approximately 1 Bcf/day of natural gas supply to the Northeast. As more coal plants retire, natural gas is the fuel most often used to replace those generators. Natural gas fired generation contributed to more than 50% of new electricity generation in 2014.

The Environmental Protection Agency is proposing, for the first time, to regulate oil and gas methane emissions. The EPA plans to propose to cut methane emissions from the oil and gas sector by 40-45% over the next 10 years from 2012 levels. The rules will be proposed this summer and finalized by 2016. While the rule will apply to only new or modified sites, the EPA plans to rely on voluntary measures to cut methane on existing oil and gas operations.

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