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In This Issue

Changes to PJM Load Forecast Cuts Benchmark Peaks

Average Annual Natural Gas Spot Price in 2015 was at Lowest Level Since 1999

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.


Market Overviews

Changes to PJM Load Forecast Cuts Benchmark Peaks

RTO Insider | January 7, 2015

PJM’s new load forecasting methodology cuts projected peaks for several key benchmarks by 3.5% or more, the RTO said last week.

In response to criticism that its forecasts overestimated loads, PJM has made a number of changes to its methodology. Among them is the treatment of weather, added variables to gauge trends in equipment and appliance saturation and efficiency, and accounting for energy efficiency resources and distributed solar generation.

The new methodology has particular ramifications for both the capacity market and transmission planning. It reduces the forecast peak for the 2019/20 Base Residual Auction by 5,660 MW (-3.5%) and that for 2021 — the next Regional Transmission Expansion Plan study year — by 8,406 MW (-5.1%).

The forecast released Wednesday projects a 2016 RTO summer peak of 152,131 MW. That’s a reduction of 5,781 MW (-3.7%) compared with PJM’s forecast a year ago but an increase of 1,836 MW (1.2%) from the 2015 normalized peak.

The RTO’s summer peak is predicted to grow 0.6% annually over the next 10 years, with growth rates for individual zones ranging from -0.1% in the Atlantic Electric zone, which has been hurt by a decline in casino gambling, to 1.2% in the Dominion zone, which is seeing “substantial on‐going growth in data center construction.”

The winter peak load is expected to rise an average of 0.8% per year over the decade, bracketed by Atlantic Electric, which shows no growth, and Dominion, up 1.6%.

The forecast for the APS zone reflects increasing load from natural gas processing plants, which are expected to add 120 MW to 280 MW annually for 2016-2020. The zone’s summer peak is expected to increase 0.8% per year through 2026 with a 1.1% annual increase in winter peaks.

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Average Annual Natural Gas Spot Price in 2015 was at Lowest Level Since 1999

The Energy Collective | January 7, 2015

Natural gas spot prices in 2015 at the Henry Hub in Louisiana, a national benchmark, averaged $2.61 per million British thermal unit (MMBtu), the lowest annual average level since 1999. Daily prices fell below $2/MMBtu this year for the first time since 2012. Henry Hub spot prices began the year relatively low and fell throughout 2015, as production and storage inventories hit record levels and fourth-quarter temperatures were much warmer than normal.

Natural gas prices at key regional trading hubs ended the year lower than their starting point. At northeastern locations, where natural gas transmission infrastructure is often constrained, prices spiked in the early months of 2015, which were colder than normal compared to much of the United States. Prices at the Algonquin Citygate, which serves Boston, and at Transcontinental Pipeline's Zone 6, which serves New York City, began the year much higher than the Henry Hub spot prices in early 2015, but then fell below the national benchmark for much of the rest of the year. The annual average spot price at Henry Hub of $2.61/MMBtu was $1.78/MMBtu, or 41%, lower than the 2014 average.

Despite declining prices, total natural gas production, measured in terms of dry gas volume, averaged an estimated 74.9 billion cubic feet per day (Bcf/d) in 2015, 6.3% greater than in 2014. This increase occurred even as the number of natural gas-directed drilling rigs decreased. As of December 18, there were 168 natural gas-directed rigs in operation, only about half the number of rigs at the beginning of 2015, according to data from Baker Hughes Inc. However, the remaining rigs are among the most productive, and producers have continued to make gains in drilling efficiency.

Low prices and strong production led to increase use of natural gas for electric power generation, which is projected to be about 26.5 Bcf/d in 2015, exceeding the 24.9 Bcf/d level in 2012. Natural gas surpassed coal as the leading source of electricity generation on a monthly basis for the first time in April, and again in each of the four months from July through October.

In the residential and commercial sectors, which use natural gas primarily for heating, consumption in 2015 declined 6.7% and 4.4%, respectively, from the previous year largely because of warmer weather. Natural gas consumption in the residential and commercial sectors was particularly high in 2014 because of cold temperatures in the first and fourth quarters. Although 2015 had a cold start, temperatures in the fourth quarter were warmer than normal throughout most of the United States.

Growth in production also allowed for strong builds in working natural gas inventory. Inventories surpassed 4,000 Bcf for the first time, reaching 4,009 Bcf in the week ending November 20.

With much of the growth in natural gas production in the Marcellus and Utica shale regions in the Midwest, several major pipeline projects came online in 2015 to transport natural gas from these plays to consumers. In August 2015, the Rockies Express Pipeline (REX) reversal was completed. REX, one of the longest natural gas pipelines in the United States, began service in 2009 to bring Rockies gas eastward. As Marcellus production increased, however, demand in the East for natural gas produced in the Rockies declined. The REX reversal added westbound capacity to enable the transport of natural gas produced in the Marcellus and Utica Shale regions to consuming markets in the Midwest. Several other new pipeline projects began to take natural gas produced in the Marcellus and Utica regions to consumer areas on the East Coast, Midwest, and Gulf Coast area.

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Natural Gas and Oil Market Update


Natural Gas Prices Rally as U.S. Supplies Fall More Than Expected

Market Watch | January 7, 2015

Natural gas futures rallied on Thursday after the U.S. Energy Information Administration reported that supplies of the commodity dropped by 113 billion cubic feet for the week ended Jan. 1. Analysts polled by Platts expected a decline of between 93 billion cubic feet and 97 billion cubic feet. The data, however, included a reclassification, which resulted in a slight increase in working gas stocks, the EIA said. Total stocks now stand at 3.643 trillion cubic feet, up 535 billion cubic feet from a year ago and 464 billion cubic feet above the five-year average, the government said. February natural gas was at $1.818 per million British thermal units, up 2.8 cents, or 1.4%. Prices traded $2.319 before the supply data.


Oil Prices Hover Near Multiyear Lows

The Wall Street Journal | January 7, 2015

Oil benchmarks fell to the lowest level in more than a decade in overnight trading amid continuing market turmoil in China, the world’s second-biggest oil consumer.

Light, sweet crude for February delivery recently fell 4 cents, or 0.1%, to $33.93 a barrel on the New York Mercantile Exchange. Prices fell to as low as $32.10 a barrel in overnight trading, the lowest intraday level since 2003.

Brent, the global benchmark, recently traded up 11 cents, or 0.3%, at $34.34 a barrel on ICE Futures Europe, after falling as low as $32.16 a barrel, the lowest intraday level since 2004.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report

Working gas in storage was 3,475 Bcf as of Friday, January 8, 2016, according to EIA estimates. This represents a net decline of 168 Bcf from the previous week. Stocks were 587 Bcf higher than last year at this time and 474 Bcf above the five-year average of 3,001 Bcf. At 3,475 Bcf, total working gas is above the five-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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