Wholesale Natural Gas is currently trading at $3.008 per DTH

I have to admit to be saddened by the decision out of Washington this afternoon.  However, I am cheered by the fact that having worked for a number of large energy companies I know that most of them invest their billions based on actual facts and science.  Thus the action this afternoon will not do things like restore American coal jobs.  Those jobs were lost the minute that scientists and engineers figured out how to access the natural gas in shale rock through horizontal drilling.  In fact the timing of the new technology was almost perfect in that it coincided with sky-rocketing O&M costs for those vintage 1950’s coal plants.  That is why the TVA began bailing on coal plants years before the MATS standards and Clean Power Plan were scheduled to take effect.

Everyone may not agree on climate change, but I think we can agree that we have had relatively beautiful weather over the past week here in Wisconsin.  And according to NOAA we are in for much of the same – at least in terms of temperatures.  (I know we have been having rain, but the farmers out in Barneveld were telling me at breakfast today that we only had 6 days without rain in May this year.)   The current NOAA forecast continues to show the eastern US at below normal temperatures in coming days.

The continuation of the mild weather combined with today’s EIA storage report of a +85 BCF build continued to push gas down for the week.  Looking back, the June gas contract rolled off the charts at $3.236 /Dth last Friday.  The July contract, which closed on May 12th at $3.498 /Dth, has now fallen $0.49 /Dth in less than a month.  The bears seem to be firmly in control, but be careful with that assumption.

First, the market is reacting to near term weather.  I still have not found a weather forecaster that says that we are going to have a cool summer.  There are those that say that we will be cooler than last year’s record summer heat, but none that have said we will have a cool summer.  Second, while the expectation remains in the market that a wave of new shale gas will be showing up, the reality is that it is still a no show.  While today’s storage report was a mild surprise to the upside it still only changed the year-on-year deficit by one (1) BCF.  Another week is gone and we are still -370 BCF behind last year.  So while the market may be in a downward move right now it could easily reverse on just one weather forecast.

The Price Changes chart shows you just how far we have fallen.  The $3.236 /Dth was the June close.  Looking at the red line, you can now see how close we have come to the lows of late February.   This downward cycle also shows in the strip pricing.  The Summer 2017 strip was off 14.5 cents for the week to $3.100 /Dth while the 2017-18 Winter strip fell 22.6 to $3.267 /Dth.  The 2018 Calendar strip was down 8.3 cents week-on-week to $3.102 /Dth while the 2019 Calendar strip lost 1.6 cents to $2.842 /Dth.

 

Have a great weekend.

 

Blake

 

Past copies are available on our website at  http://mepsolutions.org/monthy-market-updates/

 

We are also available on Twitter at @MEPNatGas with updates on natural gas prices as well as national & Wisconsin gas industry news.

Wholesale Natural Gas is currently trading at $3.182 per DTH

I was very proud to become an officer of the Blue Mounds Historical Society this week.  As a historian, a veteran and a senior citizen (at least by the reckoning of some folks), I think it is critical for people to know their history.  In this case, Blue Mounds has a very significant and colorful history that has not been as well documented as other towns in Wisconsin.  But I would encourage all of our schools to adopt a strong living history programs so that we can retain as much of the history of our towns and the men and women that reside there as possible.  Whether one goes to the local nursing home or the local VFW, there are a lot of people out there with stories to tell.

And while there are plenty of exciting stories out there, natural gas was not one of them this week.   Basically after today’s +68 BCF storage injection we are almost exactly back where we were 2 weeks ago at $3.182 /Dth, down 1 cent for the day.  While much of the north is still showing as cooler than normal, this is less problematic now than the cooler weather in south that is souring demand from the power sector.  So while this week’s storage build was a bit stronger than expected, it still under-performed against last year and the 5 year average leaving the market to scratch its proverbial head.

Thus the market has been happy to see freezing weather dissipate (thus a pull back in prices this week), but it is still lacking that strong directional signal, like a major uptick in gas production, that it continues to look for week after week.  Again, that puts us right back to where we were two weeks ago with the expiration of the June contract coming up next Friday.

Looking at the rest of the market, the 2017 summer strip sits at $3.249 /Dth, off 12.2 cents for the week.  The 2017-18 winter strip also moved down 13 cents to finish at a nice round $3.500 /Dth.  The 2018 calendar strip lost 5 cents this week to $3.092 /Dth while the 2019 calendar strip gained 0.4 cents to finish at $2.872 /Dth.

And here is my final thought for the week.  Thirty-seven years ago I moved to Houston, Texas, and was hired into the energy industry.  If your sons and daughters are pursuing a liberal arts degree just remember that it is the ability to learn and curiosity that matter most when it comes to careers.

 

Have a great weekend!

 

Blake

 

Past copies are available on our website at  http://mepsolutions.org/monthy-market-updates/

 

We are also available on Twitter at @MEPNatGas with updates on natural gas prices as well as national & Wisconsin gas industry news.

Wholesale Natural Gas is currently trading at $3.376 per DTH

After four days in Houston at the Argus America’s Gas Conference we are now brimming with confidence that gas prices will go up, if they do not go down, and that the weather will be hot unless it is cold.  In other words, our search for clarity concerning the gas markets came up just a wee bit short.  I will address some of the issues in future weeklies, but there is consensus that demand is continuing to increase on multiple fronts and that almost everyone is expecting production to increase, especially if oil stays over $50 a barrel, but starting to get nervous over the lack of signs of increases in the current reports.

However, the conference was over-shadowed by news on Wednesday that the FERC has suspended all drilling related to Rover Pipeline after a series of accidents on this Energy Transfer project (the same people that built the Dakota Access Pipeline).  This news is important to us, because much of the drop in Wisconsin basis that we saw this spring was predicated on Rover Pipeline being in-service this winter.  Right now the basis markets are still trying to assess the importance of this news with the critical questions being (1) how long will the FERC suspend work, and (2) will it delay the start-up of this pipeline beyond the coming winter season of 2017-18?

And while the basis market was dealing with the Rover Pipeline news, the gas futures have been gaining strength thanks to the cooler temperatures and a gas storage report issued today that came in below expectations with a build of just +45 BCF.  This news allowed the June gas contract to tack on another 8.4 cents today to finish at $3.376 /Dth.  One potentially bearish piece of news is that the Commodity Weather Group announced at the Houston conference that they expect this summer to be markedly cooler than last year’s record heat.  At  the same time the EIA has scaled back its forecast for the amount of gas the power sector will burn this summer due to the current price strength in natural gas.

As they typically do, the strip prices followed the lead of the June gas contract.  The 2017 summer strip was up 13.0 cents week-on-week to $3.371 /Dth while the 2017-18 winter strip rose 14.9 cents to $3.63 /Dth.  The 2018 calendar strip was up 6.4 cents this week to $3.142 /Dth while the 2019 calendar strip retreated 1.0 cent to $2.868 /Dth.

The weather in Houston was extremely nice this past week with lots of folks enjoying the open air.  That is something of a rarity in very humid Houston, but one of the points that was raised by the weather forecasters at the conference is that May weathr is a very unreliable predictor of the following summer.

 

Have a great weekend!

 

Blake

Wholesale Natural Gas is currently trading at $3.186 per DTH

This is still a market looking to be moved.  With the lingering cooler spring weather in much of the nation one would think the bears would be taking charge.  However, there seemed to be a lot of overall concern weighing on the market this week with everything from lower oil prices to lower car sales and expectations for lower economic growth both here and in China weighing on the market.  Plus, within the gas markets, despite the increases in drilling rigs and increased shale gas production, we are just not seeing signs of the expected surge in gas production.

The weekly EIA storage report came out today with a build of +67 BCF.   While this was above expectations, it was on par with both year ago and five year average injections.  Still while there is not a lot of concern at this point, gas injections are going to need to outperform last year given that the current inventory is -359 BCF lower this year.   With today’s EIA report gas traded down 4.2 cents for the day to finish at $3.186 /Dth.

Today’s market was reflected in the prices of the strips.  The 2017 summer strip was down 3.3 cents for the week to $3.241 while the 2017/18 winter strip faded 4.7 cents week-on-week to $3.481 /Dth.  The 2018 calendar strip lost 4.2 cents this week to trade at $3.078 /Dth while the 2019 calendar strip dropped 4.4 cents to $2.878 /Dth.

Josh and I will be in Houston meeting with gas producers next week so hopefully we will have some fresh words of wisdom.  🙂

Have a great weekend!

 

Blake

 


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