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In This Issue

Natural Gas Prices May Hit You in the Electric Bill

Danish firm lending $600M to Cape Wind

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 Prices May Hit You in the Electric Bill

CNBC | February 27, 2014

A surge in natural gas prices is playing out in consumers' utility bills this winter.

Just a year ago, cheap natural gas—which has become an increasingly important source of electric power generation—was helping to contain electricity prices. Now, the U.S. has seen a surge in utility costs, partly because of a prolonged stretch of bone-chilling temperatures that have boosted natural gas demand.

Coinciding with the run-up in natural gas—last week, futures for February delivery topped $5 for the first time since 2010—the Bureau of Labor Statistics reported last week that its electricity price index showed its largest month-to-month increase since 2011.

"The run-up in price can impact fuel costs, and utilities pass fuel costs on to consumers," said Christopher Muir, senior industry analyst at S&P Capital IQ. Given the regulatory and political pressures of hiking rates, utilities only do so "on a periodic basis," he added.

The snow-battered Northeast includes the Marcellus shale region in nearby Pennsylvania, a hotbed of natural gas production. However, New York, New Jersey and New England—areas feeling the pain of surging utility costs—are hamstrung by a lack of infrastructure to deliver it.

Companies want long-term commitments to add to the nearly 3 million existing U.S. energy pipelines, of which 324,000 are earmarked for gas transmission. However, gas companies are reluctant to tie themselves into a costly contract, or be forced to jump through federal, state and local regulatory hurdles.

The Northeast Gas Association cites "substantial growth in natural gas supplies," yet adds that "getting these new supplies to market requires further natural gas pipeline infrastructure investments, which requires incremental contract commitments."

Still, the price surge may spur more production. When natural gas prices cratered below $2 in 2012, producers found it hard to justify hydraulic fracturing—the controversial production method known as "fracking"—for more shale. Currently, the opposite may hold true.

"The people doing fracking said 'this is not economic for us' and they were drilling fewer wells" in 2012, said Steven Nadel, executive director of the American Council for an Energy-Efficient Economy. "Now, drilling is going up again," he added, which eventually will help prices normalize as producers stockpile more gas.

In 2012, the U.S. enjoyed one of the warmest winters on record, a factor that kept natural gas prices low, said Erica Bowman, chief economist for America's Natural Gas Alliance.

"Once you get into mid-March early April, spot prices will really come down," she said. "By October there will be a level of storage that the market will really feel comfortable with."

Other observers put the natural gas rally in context. U.S. natural gas costs a fraction of what it costs overseas, and is cheap compared with only a few years ago. In spite of a 40 percent surge that took prices above $6 a thousand cubic feet for the first time in four years, natural gas still trades at less than half 2008 levels, when prices topped $13.

Nadel explained that advances in energy efficiency have helped consumers pay less for more power.

Even amid temporary price spikes, shifts to energy-saving appliances have helped drive down electricity prices since 2007, according to data from the Energy Information Administration. The shale boom has helped cut wholesale electricity prices by 50 percent since 2008.

Danish firm lending $600M to Cape Wind

Boston Herald | February 27, 2014

A Danish export credit agency has agreed to loan $600 million to the Cape Wind offshore energy project, bringing its total financing to $900 million, roughly one-third of its overall projected cost.

“We’re in this to support Siemens (Wind Power),” said Sorren Moller, EKF’s deputy CEO, referring to the Danish company that will supply the 130 turbines in Nantucket Sound. “To us, this is very much proven technology ... Slightly more than 50 percent of our business is involved in wind, both on and offshore.”

Cape Wind last year secured a $200 million investment from a Danish pension fund, said project spokesman Mark Rodgers, and Siemens plans a $100 million equity investment. Cape Wind also has applied for a $500 million U.S. Department of Energy loan guarantee.

“We expect to be making more (financing) announcements in the coming weeks,” Rodgers wrote in an email. “We will finalize project financing in the third quarter of this year. Project construction will begin shortly thereafter.”

If the turbines begin operating in 2016 as planned, it would be after a long and often acrimonious battle.

“Cape Wind is an outdated project that would cost ratepayers three times the cost of other readily available renewable energy, adding billions of dollars in unnecessary electricity costs for Massachusetts ratepayers to create jobs overseas,” said Audra Parker, president of the Alliance to Protect Nantucket Sound.

A study conducted by Charles River Associates and paid for by Cape Wind concluded that over the life of the project, it would reduce wholesale electric prices in New England by more than $4 billion dollars.

Natural Gas and Oil Market Update

arrow up

Natural Gas Futures Fall Further After EIA Data

MarketWatch | February 27, 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 upBrent Oil Premium to WTI Declines to Least Since October

Bloomberg | February 27, 2014

Brent crude fell to the lowest level in more than a week as tension increased in Ukraine, shrinking the global benchmark’s premium to West Texas Intermediate to the narrowest level since October.

Futures slipped as much as 0.8 percent in London.

Brent for April settlement dropped 75 cents, or 0.7 percent, to $108.77 a barrel on the ICE Futures Europe exchange, at 11:34 a.m. New York time. The volume of all futures traded was about 27 percent more than the 100-day average.

WTI for April delivery slipped 44 cents, or 0.4 percent, to $102.15 a barrel on the New York Mercantile Exchange. Trading was 1 percent above the 100-day average.

The European benchmark crude’s premium to WTI narrowed to as little as $6.04 a barrel, the smallest gap since October.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report


Working gas in storage was 1,348 Bcf as of Friday, February 21, 2014, according to EIA estimates. This represents a net decline of 95 Bcf from the previous week. Stocks were 905 Bcf less than last year at this time and 711 Bcf below the 5-year average of 2,059 Bcf. In the East Region, stocks were 361 Bcf below the 5-year average following net withdrawals of 78 Bcf. Stocks in the Producing Region were 251 Bcf below the 5-year average of 775 Bcf after a net withdrawal of 5 Bcf. Stocks in the West Region were 99 Bcf below the 5-year average after a net drawdown of 12 Bcf. At 1,348 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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