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In This Issue

Natural Gas Price Soars to 5-Year High on Cold Blast

EIA Projects Retirement of 60 GW of Coal-fired Power by 2020

Natural Gas and Oil Market Update

EIA - Weekly Natural Gas Storage Report

NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price


NOAA 6 to 10 Day Outlook
Color indicates the probability of forecasted temperatures being above or below a historical average for the period.


Natural Gas Price Soars to 5-Year High on Cold Blast

Money News | February 20, 2014

Natural gas futures swung between gains and losses after reaching a five-year high as cold weather is set to extend into March and deplete storage.

Futures for March delivery climbed as much as 4.1 percent to $6.40 per million British thermal units in electronic trading on the New York Mercantile Exchange, the highest level since Dec. 4, 2008, and were down 1.4 percent at $6.065 at 12:16 p.m. London time.

The contract rose 11 percent Wednesday. The volume of all futures traded was more than twice the 100-day average.

Prices are up 43 percent this year as waves of arctic air boosted demand for heating fuel, cutting gas stockpiles in early February to the lowest level for that time of year since 2004.

“Weather forecasts will cause price volatility through March but we expect end-March storage to come in at 1.1 trillion cubic feet, the lowest since 2004,” Adam Longson, a New York- based analyst for Morgan Stanley, said in an e-mailed report.

The market overestimates costs to refill stores and an average price of $4.35 per million Btu for the injection season “should be high enough to support adequate restocking by October,” Longson said. “Prices should trend lower through summer” and may fall below $4 in the third quarter, according to the report.

If stocks fall below 1 trillion cubic feet, a summer price of $5.10 will allow for “adequate gas-to-coal switching to refill storage,” Credit Suisse analysts led by Ray Farris in Singapore said in a research note.

Midwest Storm

A storm will bring heavy, wind-driven snow to the Midwest and western Great Lakes, Michael Doll, a meteorologist at AccuWeather Inc. in State College, Pennsylvania, said on the forecaster’s website.

The low in Chicago on Feb. 26 will be 8 degrees Fahrenheit (minus 13 degrees Celsius), 17 below normal, according to AccuWeather. About 49 percent of U.S. households use gas for heating, with the largest consumers in the Midwest, U.S. Energy Information Administration data show.

Forecasts for the end of February and the beginning of March call for the weather to turn colder, with the lowest readings expected in the Midwest, MDA Weather Services in Gaithersburg, Maryland said.

“There’s record cold and snow, and massive heating demand is drawing down supplies at a furious pace,” said Stephen Schork, president of Schork Group Inc., a consultant in Villanova, Pennsylvania. “What’s more, weather forecasts call for another shot of very cold air at the end of this month.”

Gas inventories probably fell 257 billion cubic feet last week, based on the median of 16 analyst estimates compiled by Bloomberg before the Department of Energy report at 10:30 a.m. New York time Thursday.

Supplies totaled 1.686 trillion cubic feet in the week ended Feb. 7, 27 percent below the five-year average, a record deficit in government data going back to 2005.

EIA Projects Retirement of 60 GW of Coal-fired Power by 2020

Penn Energy | February 20, 2014

Coal-fired power plants in the United States have been under significant economic pressure in recent years because of low natural gas prices and slow electricity demand growth. The Annual Energy Outlook 2014 (AEO2014) Reference Case projects that a total of 60 gigawatts (GW) of capacity will retire by 2020, which includes the retirements that have already been reported to the U.S. Energy Information Administration.

Coal-fired power plants are subject to the Mercury and Air Toxics Standards (MATS), which require significant reductions in emissions of mercury, acid gases, and toxic metals. The standards are scheduled to take effect in April 2015, a deadline that is conditionally allowed to be extended by up to one year by state environmental permitting agencies. Projected retirements of coal-fired generating capacity in the AEO2014 include retirements above and beyond those reported to EIA as planned by power plant owners and operators. In these projections, 90% of the coal-fired capacity retirements occur by 2016, coinciding with the first year of enforcement for the Mercury and Air Toxics Standards.

To comply with MATS, it is assumed that all coal-fired plants have flue gas desulfurization equipment (scrubbers) or dry sorbent injection systems installed by 2016. Retirement decisions are based on the relative economics and regulatory environment of the electricity markets. A plant may retire if higher coal prices, lower wholesale electricity prices (often tied to natural gas prices), or reduced utilization make investment in equipment like scrubbers uneconomical.The full Annual Energy Outlook 2014 including all sensitivity cases will be released in the spring.

At the end of 2012 there were 1,308 coal-fired generating units in the United States, totaling 310 GW of capacity. In 2012 alone, 10.2 GW of coal-fired capacity was retired, representing 3.2% of the 2011 total. Units that retired in 2010, 2011, or 2012 were small, with an average size of 97 megawatts (MW), and inefficient, with an average tested heat rate of about 10,695 British thermal units per kilowatthour (Btu/kWh). In contrast, units scheduled for retirement over the next 10 years are larger and more efficient: at 145 MW, the average size is 50% larger than recent retirements, with an average tested heat rate of 10,398 Btu/kWh.

Natural Gas and Oil Market Update

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Natural Gas Futures Fall Further After EIA Data

MarketWatch | February 20, 2014

Natural-gas futures on Thursday fell further after the U.S. Energy Information Administration reported that supplies of natural gas dropped 250 billion cubic feet for the week ended Feb. 14. The drop was within market expectations as analysts surveyed by Platts forecast a decline of between 248 billion cubic feet and 252 billion cubic feet. Total stocks now stand at 1.443 trillion cubic feet, down 975 billion cubic feet from a year ago and 741 billion cubic feet below the five-year average, the government said. March natural gas was at $5.93 per million British thermal units, down 22 cents, or 3.5%. It was trading at $6.09 before the data.


arrow upWTI Stays Weaker With Brent Crude on U.S. Inventories

Bloomberg | February 20, 2014

West Texas Intermediate crude slipped from a four-month high after the Energy Information Administration said U.S. inventories climbed. Brent declined.

WTI for March delivery, which expires today, fell 26 cents, or 0.3 percent, to $103.05 at 11:14 a.m. on the New York Mercantile Exchange. The futures were at $103.12 before the report was released at 11 a.m. in Washington. April crude, the most active contract, slid 17 cents to $102.67. The volume of all futures traded was 23 percent below the 100-day average.

Brent for April settlement declined 27 cents to $110.20 a barrel on the London-based ICE Futures Europe exchange. Volume was 31 percent below the 100-day average. Brent crude was at a premium of $7.53 to WTI for the same month on ICE. The spread settled at $7.63 yesterday.

U.S. crude supplies rose to 362.3 million, the highest level since Dec. 20, the EIA, the Energy Department’s statistical arm, said. Distillate fuel, including heating oil and diesel, declined by 339,000 barrels. Analysts had forecast a drop of 2.1 million in the Bloomberg survey.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report


Working gas in storage was 1,443 Bcf as of Friday, February 14, 2014, according to EIA estimates. This represents a net decline of 250 Bcf from the previous week. Stocks were 975 Bcf less than last year at this time and 741 Bcf below the 5-year average of 2,184 Bcf. In the East Region, stocks were 364 Bcf below the 5-year average following net withdrawals of 129 Bcf. Stocks in the Producing Region were 277 Bcf below the 5-year average of 806 Bcf after a net withdrawal of 91 Bcf. Stocks in the West Region were 100 Bcf below the 5-year average after a net drawdown of 30 Bcf. At 1,443 Bcf, total working gas is below the 5-year historical range.

NYMEX Natural Gas Week-to-Week Price Change NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price

NYMEX Natural Gas Week-to-Week Price Change - Five Yearly Snapshot
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