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In This Issue

ISO New England: Wholesale Power Prices, Consumer Demand at Record Lows

PJM’s Capacity Auction Paints Bleak Picture for Power Generators

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

ISO New England: Wholesale Power Prices, Consumer Demand at Record Lows

MassLive | June 23, 2016

The average real-time wholesale electricity price during May, at $21.29 per megawatt-hour, was the third-lowest since March 2003, and power consumption was the sixth-lowest in the last 16 years. Also in May, the wholesale price of natural gas in New England was the fifth lowest since 2003.

March saw the lowest prices of any month since 2003 at $17.20 per megawatt-hour.

The ISO, in a recent newswire update, attributes mild weather, increased energy-efficiency measures and behind-the-meter solar for the low consumption numbers. The low natural gas prices are attributable to high production at the wellhead, moderate demand and record-high storage levels.

Consumer demand and the cost of procuring fuel tend to drive wholesale electricity prices in New England, where about 49 percent of all power generated is from natural gas plants.
New England benefited in 2015 from some of its least expensive wholesale electricity on record. It's a change from the "polar vortex" winter of 2013-2014 when electricity prices in New England soared.

According to the U.S. Energy Information Service, price spikes seen in previous winters were caused by natural gas supply constraints, when demand by heating customers and power plants on very cold days exceeded natural gas pipeline capacity. Natural gas prices in the Northeast have historically been very volatile, particularly during periods of high demand.

Since then, increased supplies of liquefied natural gas, or LNG, helped moderate both wholesale natural gas and electricity prices, according to the U.S. Energy Information Administration. LNG import terminals in New England and Canada, as well as LNG storage facilities, can feed the pipeline system, skirting constraints between the Northeast and the rest of the country.

In addition, a winter reliability program introduced by the ISO provides incentives for electricity generators to maintain onsite supplies of oil and secure contracts for LNG to ensure adequate fuel during the coldest months. In addition, a pay-for-performance mechanism, due to go into effect in 2018, will further encourage power plants to plan for peak load conditions.

In May, natural gas and nuclear plants produced most of the 8,823 gigawatt-hours of electricity generated in New England, at about 55 and 28 percent of the power load. Renewables accounted for 9 percent, and hydropower 8 percent, according to the ISO. One gigawatt-hour of electricity can serve about a million average homes in New England for one hour.

Home heating customers are less vulnerable to natural gas market volatility because local distribution companies enter into firm contracts for pipeline capacity instead of purchasing the fuel on the spot market.

Read More:

PJM’s Capacity Auction Paints Bleak Picture for Power Generators

Market Realist | June 23, 2016

PJM Interconnection’s capacity auction

Grid operator PJM Interconnection’s recent capacity auction for June 2019–May 2020 reflects poor sector fundamentals driven by supply and demand issues. Last month’s auction cleared 167,306 megawatts of capacity, which came in at more competitive prices than last year. These prices fell due to energy efficiency programs and a drop in natural gas prices.

Factors contributing to the fall in power prices

Wholesale power prices have remained low and are likely to worsen the problems facing independent power producers. A lower load forecast and a large amount of new gas-fired combined cycle generation have pulled power prices lower. Nearly 5,000 megawatts of new natural gas–fired generation were on offer in these auctions. The $100 per megawatt-day prices were far below analysts’ expectations. UBS analysts estimated $125 per megawatt-day, while Tudor, Pickering, Holt, & Company estimated $150 per megawatt-day.

In the Eastern MAAC delivery area, the capacity performance price in the auctions was $119.77 per megawatt-day, while in the Baltimore Gas & Electric delivery area, it was $100.30 per megawatt-day. In Commonwealth Edison’s territory, the price was $202.77 per megawatt-day. All regions reported a significant fall compared to prices in previous auctions.

According to PJM Interconnection, the auction will cost-load a total of $6.9 billion in 2019–2020, compared with $11 billion in last year’s auction for 2018–2019.

PJM Interconnection’s capacity market ascertains long-term grid reliability by obtaining power supply required three years from now, plus the expected rise in demand or reserves. Power generators get “pay-for-performance” by delivering power reliably, particularly during emergencies.

Impact on merchant generators

Exelon (EXC), the largest nuclear generator, was the biggest loser in this year’s PJM Interconnection capacity auctions. As a result, it won’t get any capacity revenues in 2019–2020, which could have a negative impact on its earnings. The shares of hybrid utility FirstEnergy (FE) and merchant generators Dynegy (DYN) and NRG Energy (NRG) skidded after these auctions.

Read More:

Natural Gas and Oil Market Update


Oil Slips After Small U.S. Drawdown; Seen Choppy Before Brexit Vote

Reuters | June 23, 2016

Oil prices slipped on Wednesday after the U.S. government reported a smaller-than-expected inventory drawdown, and as investors fretted about Britain’s upcoming vote on whether to stay in the European Union.

Crude futures rose in early trading, with global benchmark Brent and U.S. crude’s West Texas Intermediate (WTI) both trading above $50 a barrel at one point.

Prices headed lower after the U.S. Energy Information Administration (EIA) reported a stockpile decline of 917,000 barrels for the week ended June 17.


Natural Gas Futures Edge Lower After Bearish Weekly Storage Data | June 23, 2016

U.S. natural gas futures declined in North America trade on Thursday, after data showed that natural gas supplies in storage in the U.S. rose more than expected last week.

Natural gas for delivery in July on the New York Mercantile Exchange shed 3.1 cent, or 1.2%, to trade at $2.645 per million British thermal units by 14:32GMT, or 10:32AM ET. Prices were at around $2.681 prior to the release of the supply data.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended June 17 rose by 62 billion cubic feet, above forecasts for an increase of 58 billion.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report

Working gas in storage was 3,103 Bcf as of Friday, June 17, 2016, according to EIA estimates. This represents a net increase of 62 Bcf from the previous week. Stocks were 618 Bcf higher than last year at this time and 678 Bcf above the five-year average of 2,425 Bcf. At 3,103 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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