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.
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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Hutchinson Business Solutions 