Going Up

April 8, 2014

As reported in eia.gov

First the report:

  • Natural gas working inventories on March 28, 2014, were 0.82 trillion cubic feet (Tcf), 0.88Tcf (52%) below the level at the same time a year ago and 0.99Tcf(55%) below the five-year average (2009-13).  Henry Hub natural gas spot prices were volatile over the past few months, increasing from $3.95 per million British thermal units (MMBtu) on January 10 to a high of $8.15/MMBtu on February 10, before falling back to $4.61/MMBtu on February 27, and then bouncing back up to $7.98/MMBtu on March 4.  EIA expects that the Henry Hub natural gas spot price, which averaged $3.73/MMBtu in 2013, will average $4.44/MMBtu in 2014 and $4.11/MMBtu in 2015.

Bottom Line:

 

Natural gas prices are going up for foreseeable future. Reserves are down, they have to be replenished. The summer forecast is casting a shadow. Should they be looking at a warming trend with hotter temperatures during the summer months that will also prevent gas prices from dropping; since 30% of electricity is generated with natural gas.

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Scratching My Head

April 3, 2014

What goes up!!!

 

 

Must go somewhere…

 

 

 

For it surely isn’t…

 

 

Coming down

 

 

 

It seems the natural gas market

 

Has taken on

 

A life of its’ own

 

 

You have probably

 

Seen me write about…

 

The plight of the nymex

 

 

 

The nymex is where gas is traded

 

 

It represents

 

Gas out of the ground

 

 

 

In mid-December

 

 

The nymex was trading

 

 

In the mid $3 range

 

Per Dekatherm

 

 

 

(A dekatherm is 10 therms….

 

 

We buy gas in bulk!!!)

 

 

 

When the cold weather

 

Bolted upon us

 

 

 

The nymex shot up

 

Into the $5 to $6 range

 

 

 

This is something

 

We regularly discuss with our clients

 

 

It is during the winter months

 

From November thru March

 

 

People use the most gas

 

 

 

And because of the increased demand

 

 

The market can be volatile

 

 

 

It is important to price protect yourself

 

During this time period

 

 

 

The nymex

 

 

Has slowly been making

 

Its’ way back down

 

 

 

As of this writing

 

The nymex is trading

 

 

At $4.45 a dekatherm

 

 

 

 

Still higher than December

 

 

 

 

Will it go back under $4?

 

 

 

 

That remains to be seen

 

 

 

 

Market trends are…

 

 

 

An ongoing conversation

 

In this business

 

 

 

Similar to breathing

 

 

 

 

The second equation

 

That makes up

 

Natural gas prices

 

 

 

Is the Basis

 

 

(Transportation Cost)

 

 

 

How do you get the…

 

 

Gas out of the ground

 

 

To the local provider

 

ie: PSEG, SJ Gas Peco etc.

 

 

 

 

This is where things

 

Get tricky

 

 

 

Over the past 10 years

 

The basis price

 

Ran around….

 

 

$2 – $3 a dekatherm

 

 

 

 

Over the last year

 

 

 

Basis prices dropped

 

To an all-time low

 

 

 

In the past…

 

Gas was coming from

 

The Gulf of Mexico..

 

 

 

Now with new technology…

 

 

 

They are pulling gas

 

From Pennsylvania and New York

 

 

 

 

As a result

 

 

 

We have seen

 

Basis prices

 

 

 

Drop

 

 

 

That was until the cold weather hit

 

In January

 

 

 

Over a 2 day period

 

 

Basis went from….

 

 

Below $2 a dekatherm

 

 

 

To $11 a dekatrherm

 

 

 

And then leaped to over

 

 

$20 a dekatherm

 

 

The next day

 

 

 

We were in unchartered waters

 

 

 

Basis has slowly been making

 

Its way back down

 

 

 

But it hasn’t recovered

 

As quickly as

 

The nymex

 

 

 

The Basis market is

 

Still spooked by the

 

 

Polar Vortex

 

 

 

 

Currently the Basis price is trading

 

 

 

In the $7 range

 

 

 

That is still

 

Way too high

 

 

 

Maybe the basis pricer uppers

 

 

 

Do not realize that…

 

 

 

Winter is over

 

 

 

 

Don’t any of their kids playing….

 

 

Baseball

 

 

 

 

Spring is here

 

 

 

 

The snow is gone

 

 

 

 

Let’s get back to

 

 

 

Market reality!!!!

 

 

 

Or

 

 

 

Could this be the…

 

 

 

New reality

 

 

 

 

 

Stay tuned

 

 

 

We’ll keep you posted

 

To learn more email george@hbsadvantage.com

 

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