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In This Issue

Some US Consumers May See High Power Prices for Next Several Winters

Cooler Summer Temperatures to Remain Focused Across the Central US

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.


Some US Consumers May See High Power Prices for Next Several Winters

Platts | July 24, 2014

Electricity consumers in the US Northeast and Mid-Atlantic regions could see higher-than-average prices for the next several winters if last winter's bitter cold is repeated until additional natural pipeline capacity into the region is brought into service, competitive energy retail supplier ConEdison Solutions said in a new report.

ConEdison Solution, a unit of New York-based utility Consolidated Edison, said the polar vortexes that blasted the Northeast and Mid-Atlantic with sustained periods of brutal cold during the 2013-2014 winter led to a spike in the price generators paid for natural gas. The increase was largely due to inadequate pipeline capacity, the report said.

Gas-fired power generators, forced to buy gas from the spot market to deal with shortages, paid prices that were in some cases 878% higher than the 12-month average, the report said, adding that gas prices at the the Algonquin Gas Transmission city-gates in New England hit a high of $75.48/MMBtu on January 22, compared with the 12-month average of $8.60/MMBtu.

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"Any proposed project to provide relief by reducing pipeline constraints will likely take years to complete, so consumers exposed to energy markets over the next few winters should expect higher-than-average prices during those months," the white paper said. "Whether prices will be higher or lower than this winter will depend on a number of factors, including the severity and duration of cold weather."

Last winter's cold also challenged the reliability of the electric grid, prompting PJM Interconnection to issue several warnings and requests for curtailment in January. Consumers were asked to conserve electricity and real-time power prices skyrocketed to $1,800/MWh during certain hours, a 2,798% increase above the $64.33/MWh 12-month average, the report said.

"The unexpected extremes of the Polar Vortex reminded us that energy users need to be vigilant," Richard Rathvon, vice president at ConEdison Solutions, said in a statement Monday. "In a marketplace that often defies prediction, the energy consumer needs to fully comprehend the range of risks and benefits that may be associated with the contracts they sign."

Consumers paying variable market-based prices for their electricity saw the biggest spikes, but even some with fixed price contracts ended up paying more than expected.

Those served by "smaller, less-financially stable suppliers" that went out of business when the record-setting costs hit "were dropped back to their utility's default service," and often had to pay prices above their fixed price contract, the company said. Utilities usually pass cost increases through to consumers either as they are incurred or in future periods, the report said.

The report recommended that consumers understand the energy supply products they purchase, including how risk is shared between them and supplier and whether their contract has fixed prices or variable market-based prices.

The report argued for energy supplier transparency, putting the responsibility of informing consumers of their energy options and the differences, risks and benefits of those options on the supplier.

Cooler Summer Temperatures to Remain Focused Across the Central US

WSI | July 24, 2014

WSI (Weather Services International) has issued their latest forecast for the August-October period. The forecast indicates that below-normal temperatures will be prevalent from the northern and central Rockies eastward across the Great Lakes and Ohio Valley regions, with above-normal temperatures expected elsewhere, especially the Pacific Northwest and Southeast. The most significant negative temperature anomalies will be found across the northern Plains (MISO power pool). The WSI seasonal outlooks reference a standard 30-year normal (1981-2010).

According to WSI Chief Meteorologist Dr. Todd Crawford: "After a moderately warm June, July has turned sharply cooler, especially across the central US. This trend towards cooler temperatures as the summer progresses is common during emerging El Nino events, as the atmosphere becomes more supportive of the increased west Pacific tropical activity that often forces cooler Canadian air masses southward into parts of the central and eastern US. We expect this shift in the seasonal base state to persist through the remainder of summer, with the more unpredictable sub-seasonal variations superimposed on the larger-scale signal. The eastern US will see more variability, with occasional waves of heat alternating with cooler spells going forward. Finally, some of the initial analysis we've done suggests that another cold winter may be favored this year, although there are still many other drivers of the winter pattern that will reveal themselves in the coming months. Because of these 'known unknowns,' confidence in a winter forecast this far out is very low."

In August, WSI sees the monthly breakdown as:

  • Northeast* - Cooler than normal
  • Southeast* - Warmer than normal
  • North Central * - Cooler than normal
  • South Central* - Warmer than normal
  • Northwest* - Warmer than normal
  • Southwest* - Warmer than normal

According to Chris Kostas, Senior Power & Gas Analyst at ESAI Power LLC: "In August, cooler-than-normal temperatures centered over PJM and MISO should soften power prices and implied market heat-rates. Northeast natural-gas prices (i.e. Marcellus shale gas region) should continue to run very soft compared to Henry Hub due to below-normal regional temperatures and increased production. Reduced weather-related demand should also allow natural-gas inventories to refill rapidly in August and decrease the deficit to last year's level. In Texas, warmer-than-normal August temperatures should help firm ERCOT power prices and implied market heat-rates."

In September, WSI forecasts:

  • Northeast - Warmer than normal
  • Southeast - Warmer than normal
  • North Central - Cooler than normal
  • South Central - Warmer than normal
  • Northwest - Warmer than normal
  • Southwest - Warmer than normal

Kostas added: "In September, mild Midwest temperatures should continue to pressure natural-gas prices lower particularly in eastern Pennsylvania where increased production and pipeline constraints are causing wide price spreads to Henry Hub this year. Above-normal natural-gas injection rates are likely to continue in September. Natural-gas inventories have exceeded last year's injection rate by 2.3 Bcf/day through the first half of the injection season. With relatively mild temperatures expected in August and September, we expect this figure to increase during the second half of the injection season. Warmer-than-normal temperatures in the South and cooler-than-normal temperatures in the Midwest should also help keep Henry Hub prices firm relative to Marcellus price points. Although relatively soft Northeast power prices are expected in in September, relatively firm power prices are possible in California due to firm electrical loads and decreasing hydro generation in the region."

In October, WSI forecasts:

  • Northeast - Warmer than normal
  • Southeast - Warmer than normal
  • North Central - Cooler than normal
  • South Central - Cooler than normal
  • Northwest - Warmer than normal
  • Southwest - Warmer than normal

Kostas noted: "Energy demand is expected to soften considerably in October due to moderating seasonal temperatures. Soft energy demand in the Northeast and Marcellus shale gas regions should continue to pressure delivered natural-gas prices lower and help natural-gas inventories finish the injection season very strong. As a result of the relatively mild temperatures expected over the next three months, we are forecasting North America inventory levels will finish the injection season above 3,700 Bcf (and not far off last year's adjusted level of 3,809 Bcf). While natural gas prices are expected to finish the summer injection season relatively soft, October power prices and implied market heat-rates should be supported by seasonal generator maintenance."

Natural Gas and Oil Market Update

arrow up

Natural Gas Futures Rally Off 8-month Low After Storage Data | July 24, 2014

Natural gas futures rallied off an eight-month low on Thursday, after data showed that U.S. natural gas supplies rose less than expected last week. On the New York Mercantile Exchange, natural gas for delivery in August rallied 1.73%, or 6.5 cents, to trade at $3.827 per million British thermal units during U.S. morning hours. Futures traded at $3.823 prior to the release of the supply data. Natural gas prices fell to a session low of $3.744 earlier, the weakest level since November 26. Futures were likely to find support at $3.741 per million British thermal units, the low from November 26 and resistance at $3.866, the high from July 22.


arrow upWTI Crude Declines After U.S. Gasoline Supplies Rise

Bloomberg | July 24, 2014

West Texas Intermediate declined after inventories of gasoline expanded for a third week in the U.S., the world’s largest oil consumer. Brent fell in London.

Futures decreased as much as 0.4 percent in New York after rising 0.7 percent yesterday. Gasoline stockpiles expanded by 3.38 million barrels, compared with a projected gain of 1 million, according to an Energy Information Administration report yesterday. Crude stockpiles at Cushing, Oklahoma, the biggest U.S. oil-storage hub, dropped by 1.45 million barrels to 18.8 million, the least since November 2008, the report showed.

WTI for September delivery was at $102.87 a barrel on the New York Mercantile Exchange, down 25 cents, at 1:02 p.m. London time. The contract increased 73 cents to $103.12 yesterday. The volume of all futures traded was 2.9 percent below the 100-day average for the time of day. Prices have advanced 4.5 percent this year.

Brent for September settlement was 17 cents lower at $107.86 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $5.02 a barrel to WTI on ICE, compared with $4.91 yesterday.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report


Working gas in storage was 2,219 Bcf as of Friday, July 18, 2014, according to EIA estimates. This represents a net increase of 90 Bcf from the previous week. Stocks were 561 Bcf less than last year at this time and 683 Bcf below the 5-year average of 2,902 Bcf. In the East Region, stocks were 319 Bcf below the 5-year average following net injections of 56 Bcf. Stocks in the Producing Region were 284 Bcf below the 5-year average of 1,034 Bcf after a net injection of 23 Bcf. Stocks in the West Region were 80 Bcf below the 5-year average after a net addition of 11 Bcf. At 2,219 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 ($ per mmBtu)

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