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 Storage Injections To Date Point To Potentially Ugly Winter
Forbes | June 5, 2014
Gas storage numbers released by the Energy Information Administration indicate that storage injections are well below historical averages. In fact, they are 922 billion cubic feet (Bcf) below the 5 year average of 2302 Bcf, and 748 Bcf lower than last year at this time. This, despite the fact that March saw the highest historic production levels of U.S. natural gas.
After last year’s rough winter – with extra demand driven by electricity and heating load – gas reserves were fairly well depleted. At present, the inventories have not been built up as quickly as would be necessary to reach the five year average. This suggests that electricity prices, which are often driven by gas-fired power plants on the margin, are likely to see upward pressure this winter.
Storage increases over the past couple of weeks have been above average, but we still have some ways to go. With 23 weeks remaining in the injection season (April 1 through October 31), we will need to see the injection numbers well above average in order to avoid upward pressure on power prices.
By way of some background, most natural gas is stored in three separate types of reservoirs:
1) depleted reservoirs in oil or gas fields;
3) salt cavern formations.
According to the EIA, the majority of gas storage takes place in the oil and gas fields, close to areas of demand. The advantage of these reservoirs is that they can take advantage of the existing wells, pipelines, and other related infrastructure. The other advantage is that these depleted reservoirs are quite numerous.
In the Midwest, aquifers are frequently used, but the surrounding rock needs to be impermeable. They also need a fair amount of ‘cushion’ gas which must stay in the reservoir to allow the remaining gas to be utilized.
Finally, salt caverns form a large percentage of storage down on the Gulf Coast. Such reservoirs are valuable in that they required less cushion gas and can be subjected to more frequent injection and withdrawal cycles.
It should be noted that though the underlying gas price is a significant drivers for electricity prices, it is by no means the only one. In New England, for example, fundamental constraints related to natural gas pipelines also drive power prices up.
If summer heat comes our way, injection numbers may slow as more gas is burned to produce electricity, In the weeks and months to come, these injection numbers will be well worth watching.
Proposed EPA Rules Will Cut Carbon Pollution While Maintaining Reliability
Breaking Energy | June 5, 2014
Historically, the electric utility sector has a strong track record of maintaining the reliability of our nation’s electric grid. Working collaboratively, federal and state governments, regulators, utilities, grid operators and other stakeholders have developed technologies, tools and procedures to protect our nation’s critical infrastructure. That record goes back decades and is one that should make us all proud.
Yesterday, the Environmental Protection Agency (EPA) proposed a plan to cut carbon pollution from power plants. EPA’s proposal — called the Clean Power Plan – will cut power sector emissions 30 percent below 2005 levels by 2030. Power plants are the largest source of U.S. carbon pollution, and this plan is a major step in addressing climate change and its impacts on public health.
In addition, the Plan puts states in the driver’s seat and gives them sufficient flexibility to use all the tools at their disposal to meet the requirements of the rule while maintaining the reliability of the electric system.
The key flexibilities are (1) state-wide targets rather than plant-specific requirements, (2) timing, (3) an “all-of-the-above” set of compliance options, and (4) the opportunity for multistate cooperation. Under the Clean Power Plan, states can retain all power plants needed to ensure reliability, dispatching them less intensively during off-peak hours as needed to achieve their state-wide emissions rate reductions. Moreover, they have sufficient time to craft plans to maintain reliability while meeting their carbon pollution reduction goals. Furthermore, the plan gives states tremendous flexibility to choose from a broad set of low-carbon options (including natural gas, coal with carbon capture and sequestration, nuclear energy, renewable energy or energy efficiency). The Plan also allows for collaboration across state lines, building on a long tradition of multistate cooperation to ensure broader power system reliability.
The Energy Department will provide technical assistance and constructively engage with state regulators, regional reliability coordinators, independent system operators, regional transmission operators, state public utility commissions and other stakeholders. We are committed to working with the EPA and stakeholders to successfully implement the Clean Power Plan while maintaining electric grid reliability.
Natural Gas and Oil Market Update
Natural Gas Prices Move Lower After EIA Data
MarketWatch | June 5, 2014
Natural Gas futures on Thursday moved lower after the U.S. Energy Information Administration reported that supplies of natural gas rose 119 billion cubic feet for the week ended May 30. Analysts surveyed by Platts forecast an increase of between 114 billion cubic feet and 118 billion cubic feet. Total stocks now stand at 1.499 trillion cubic feet, down 737 billion cubic feet from a year ago and 896 billion cubic feet below the five-year average, the government said. July natural gas was at $4.60 per million British thermal units, down 4 cents, or 0.9%. It was trading at $4.66 before the data.
BWTI Falls a Second Day on U.S. Fuel Inventories
Bloomberg | June 5, 2014
West Texas Intermediate fell for a second day after inventories of gasoline and distillate fuels increased in the U.S., the world’s biggest oil consumer. Brent slipped as the European Central Bank cut its deposit rate below zero.
Futures dropped as much as 0.5 percent in New York. Gasoline stockpiles increased by 210,000 barrels to 211.8 million in the seven days ended May 30, while distillate inventories, including heating oil and diesel, climbed by 2.01 million barrels to 118.1 million, the Energy Information Administration reported yesterday. The ECB said it would implement further measures as policy makers try to counter the prospect of deflation.
WTI for July delivery declined as much as 52 cents to $102.12 a barrel in electronic trading on the New York Mercantile Exchange and was at $102.27 at 1:11 p.m. London time. The volume of all futures traded was 34 percent below the 100-day average for the time of day. Prices are up 3.9 percent this year.
Brent for July settlement decreased as much as 54 cents, or 0.5 percent, to $107.86 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $5.68 to WTI on ICE. The spread closed at $5.76 yesterday, the narrowest since April 15.
EIA - Weekly Natural Gas Storage Report
Working gas in storage was 1,499 Bcf as of Friday, May 30, 2014, according to EIA estimates. This represents a net increase of 119 Bcf from the previous week. Stocks were 737 Bcf less than last year at this time and 896 Bcf below the 5-year average of 2,395 Bcf. In the East Region, stocks were 423 Bcf below the 5-year average following net injections of 69 Bcf. Stocks in the Producing Region were 367 Bcf below the 5-year average of 942 Bcf after a net injection of 31 Bcf. Stocks in the West Region were 106 Bcf below the 5-year average after a net addition of 19 Bcf. At 1,499 Bcf, total working gas is below the 5-year historical range.
NYMEX Natural Gas Week-to-Week Price Change
Natural Gas Futures - Five Year Price
|Disclaimer: The information contained in these reports is gathered from public and/or internal sources and is presented solely for the convenience of our customers and Newsletter Subscribers. Patriot Energy Group makes no representation or warranty, express or implied as to the accuracy or completeness of the information set forth in this newsletter, and Patriot Energy shall not have any liability to any person or entity resulting from use of this information in any way.