As reported in Wall Street Journal

By
Tim Puko

A repeat of last year’s snowy, Arctic-cold winter is looking a little more likely today. Natural gas traders, still scarred by the memory, are bunkering in.

Buyers have been rushing into the gas market for a week on fears of a sequel to last winter’s Polar Vortex, which walloped the eastern half of the U.S. with brutally cold temperatures from the deep south up to New England. Many spent months dismissing that possibility as simple panic, but now meteorologists are getting more pessimistic.

Both Commodity Weather Group and WeatherBELL Analytics LLC released long-term forecasts this week showing a notably higher risk for a cold December. That was supposed to be relatively mild month this winter, balancing out a cold January and February. Now the whole winter is shaping up to be “pretty nasty,” WeatherBELL said.

That has propelled natural gas to a six-session rally. It’s rebounded nearly 18% since it hit its 2014 low last week. Gains of nearly 3% Tuesday are pushing it near a three-month high.

And traders are all wondering if the winter of 2015 will bring a repeat of 2014.

“I think it’s a reasonable risk,” said Matt Rogers president and meteorologist at Commodity Weather Group in Bethesda, Md. An early season burst of cold starting next week is already “really spooking a lot of people.”

More than half of all U.S. homes use natural gas as their heating fuel, making the natural gas market especially vulnerable to weather. Tepid demand had capped the market for four months and had bankers and investors fearing a glut by the spring. The new forecasts have flipped that script, at least temporarily.

Timothy J. Collins, director at Fairfield Advisors LLC in Madison, N.J., has had to get out of spread bets that depended on falling prices in January, he said. He is now trying to buy into positions that would benefit from rising prices that month, but he still thinks that record production will help balance out the fear of a Polar Vortex repeat, he said.

“I think people are overly sensitive to it,” said Mr. Collins, whose fund manages $35 million. “You know how they say the military is always trying to fight the last war? Well, we keep trading the last position.”

The rally could produce bargains for stock investors, said Jonathan Waghorn, co-portfolio manager at Guinness Atkinson Asset Management Inc. in London. Its $84-million fund holds Chesapeake Energy Corp., QEP Resources Inc. and Ultra Petroleum Corp, among other oil and gas producers that could benefit from rising gas prices balancing out free-falling oil prices.

“Gas is strong, yet the energy equities names are all getting hit,” Mr. Waghorn said. “If you believe the gas story, today’s giving you a good opportunity to pick up some energy names getting smashed by weak oil.”

As reported in US Energy Administation  

Electric Monthly Update   3/21/14

Net generation in the United States increased 8.2 percent in January 2014 compared to the previous year. This year-over-year increase in electricity generation occurred because most states in the eastern half of the U.S. experienced significantly below normal temperatures in January 2014. This led to a significant increase in heating load compared to last year which caused increased demand for electricity generation during January 2014. The only region that experienced a decrease in electricity generation in January 2014 was the West, where the overall average temperature for many Western states was significantly above average for January. This caused the West to have a 4.4 percent decrease in electricity generation compared to last January.

For the second consecutive month, electricity generation from coal increased in all regions of the country except for the West. The change in natural gas generation was much more varied, with the Mid-Atlantic, Southeast, Florida, Central, and the West all experiencing increases in natural gas generation. The Northeast and Texas all experienced decreases in natural gas generation compared to last January. The Northeast had the largest percent change in natural gas generation, decreasing 17.2 percent compared to last January. The large decrease in natural gas generation in the Northeast can be attributed to the significantly colder temperatures experienced in January 2014, which led to a large increase in natural gas prices in the region that, on some days, effectively priced natural gas generation out of the market.

Electricity generation from nuclear plants increased in almost all parts of the country, except for in the Mid-Atlantic and Southeast where nuclear generation was down slightly from the previous year. Other fossil generators increased electricity generation in all regions of the country during January 2014, particularly in New England, the Mid-Atlantic and the Southeast. At times, it was cheaper to burn oil than natural gas.

Short-Term Energy Outlook

March 11, 2014 Release

 As reported by US Energy Information Administration

Highlights   

 

  • Temperatures east of the Rocky Mountains have been significantly colder this winter (October – February) compared with the same period both last winter and the average for the past 10 years, straining distribution networks and putting upward pressure on consumption and prices of fuels used for space heating.  U.S. average heating degree days were 13% higher than last winter (indicating colder weather) and 10% above the October  through February 10-year average.  The Northeast was 13% colder than last winter, the Midwest and South both 19% colder, while the West was 5% warmer.

 

  • The cold weather this winter had the greatest effect on propane prices, particularly for consumers in the Midwest.  Cold temperatures have tightened supplies that were already low heading into the winter heating season.  Residential propane prices in the Midwest rose from an average of $2.08 per gallon (gal) on December 2, 2013, to $4.20/gal on January 27; prices have since fallen back to $2.78/gal as of March 3.  EIA now expects that propane prices in the Midwest will average $2.62/gal over the winter (51% higher than last winter) while those in the Northeast will average $3.47/gal (15% higher than last winter).

 

  • Cold temperatures have continued to tighten heating oil supplies and helped drive up retail prices.  Since the beginning of the year, distillate inventories in the Northeast (Petroleum Administration for Defense Districts 1A and 1B) have fallen by almost 6.9 million barrels to reach 18.3 million barrels on February 28, 6.4 million barrels below inventory levels for the same week in 2013.  Weekly U.S. residential heating oil prices increased by $0.20/gal during January and have averaged near $4.24/gal since the beginning of February.  Despite the recent increases, EIA expects that U.S. heating oil prices will average $3.83/gal this winter, $0.04/gal (1%) lower than during last year’s winter heating season, mainly because of lower crude oil prices.

 

  • The North Sea Brent crude oil spot price in February averaged near $110 per barrel (bbl) for the eighth consecutive month, while West Texas Intermediate (WTI) crude oil prices increased by $6/bbl from the previous month to reach $101/bbl.  Continued high refinery runs helped reduce inventories at the Cushing, Oklahoma, storage hub to 32 million barrels, the lowest level since February 2012, and helped strengthen WTI prices.  The discount of WTI crude oil to Brent crude oil, which averaged more than $13/bbl from November through January, fell to $8/bbl in February.  EIA expects the WTI discount to average $10/bbl in 2014 and $11/bbl in 2015.

 

  • Cold weather also contributed tocontinuing large withdrawals of natural gas from storage and a surge in natural gas spot prices, which hit record levels in several markets during periods of extreme cold.  Natural gas working inventories on February 28 totaled1.20 trillion cubic feet (Tcf), 0.91Tcf(43%) below the level at the same time a year ago and 0.76Tcf(39%) below the five-year average (2009-13).  Henry Hub natural gas spot prices were volatile over the past two 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, an increase of $0.28/MMBtu from the 2014 projection in last month’s STEO.  Residential natural gas prices are expected to average $10.05 per thousand cubic feet (Mcf) this winter, an increase of $0.30/Mcf (3%) from last winter.

 

http://www.eia.gov/forecasts/steo/

1…2…Punch

January 29, 2014

The polar vortex punch

 

Keeps punching

 

 

This week we saw

 

Temperatures plunge….

 

Once again

 

 

It may have been nice….

 

The first time around

 

 

 

But by now…

 

 

People seem to be getting

 

A little groggy

 

 

It’s time to change the channel

 

 

 

As I stated last week

 

The energy market did react

 

To the plunging temperatures

 

 

Basis (transportation cost) went up 1000% in 1 day

 

 

Over the past year

 

 

Basis pricing

 

Has been at a 10 year low

 

 

The jump in pricing

 

Had many experts just shaking their heads

 

 

They were finding themselves in…

 

 

Unchartered waters

 

 

This was beyond whiplash

 

 

 

We do not see these prices sustaining

 

 

If you look at natural gas futures

 

A couple months out

 

Prices tend to be

 

More reasonable

 

 

 

You just do not want to

 

Be shopping your account

 

And include the present month energy pricing

 

In the mix

 

 

For it will skew the whole proposal

 

And you will end up paying a premium

 

 

 

They say…

 

Patience is a virtue

 

 

In this business

 

You need it

Polar Vortex

January 29, 2014

Let’s take a look

 

At our extended weather forecast…

 

 

Well…

 

 

Tomorrow is going to be cold

 

 

 

The next day…

 

Should be just as cold

 

 

Possibly colder

 

 

 

Then

 

The day after that…

 

 

Will probably be just as cold

 

 

 

However, we also show that

 

There could be a chance of….

 

 

Freezing rain…

 

 

It might be snow…

 

 

Or

 

 

Possibly a Wintery Mix

 

 

 

This can all bring icy conditions

 

 

 

 

Let’s be careful out there

 

 

 

 

 

Let’s take a minute to look at

 

 

What may be causing

 

 

This weather pattern

 

 

 

Normally

 

We would be looking to the

 

 

Western Pacific

 

 

 

However it seems that La Nina

 

 

Is taking the winter off

 

 

 

Instead…

 

 

We have been visited by

 

 

A polar vortex

 

Pushing down from the Artic

 

 

 

In the first two weeks of 2014

 

 

Much of the United States weathered

 

A cold snap of unprecedented proportions…

 

 

 

A weather phenomenon known as…

 

The “Polar Vortex”

 

 

Shattering temperature records across the country

 

 

 

Just when you thought it was safe

 

To go outside…

 

 

 

Another polar vortex is on the way

 

 

This one is due to hit

 

 

This week

 

 

 

 

Is this a new phenomenon?

 

 

 

I thought it was just cold outside

 

 

 

Because it is…

 

 

January

Meanwhile…

 

The energy markets

 

Have been in a reaction mode

 

 

 

Put a name on the weather conditions

 

 

And they are all in

 

 

 

Prices jump

 

 

 

You wait a day…

 

 

They jump again

 

 

 

You wait a few more days

 

 

Prices start to ease back down

 

 

 

 

Prices never come down…

 

 

As fast as they go up

 

 

 

With another polar vortex

 

 

On the way

 

 

 

You can almost hear

 

 

The energy market’s teeth clattering

 

 

 

While all this is happening

 

 

 

We find it best

 

To look past

 

The frenzy

 

 

One thing I have learned

 

 

Being in the energy business…

 

For 13 years

 

 

 

Patience is a virtue

 

 

 

Our goal has always been

 

 

 

To educate our clients

 

 

And…

 

 

Provide the best opportunity

 

 

For savings

 

 

 

 

With a lower basis (transportation) cost

 

 

And increasing natural gas supplies

 

 

 

Most experts feel

 

 

Natural gas prices will settle down

 

 

 

Once again bringing

 

 

Great opportunities for savings

 

 

In both

 

 

The Natural Gas and Electric markets

 

 

 

We just have to wait for the Polar Vortex

 

 

To pass

As reported in Christian Science Monitor

By             , Staff writer / January 8, 2014

The polar vortex gripping the nation is as unpleasant for utilities and grid operators as it is for you. What does the polar vortex mean for your next utility bill?

What happens when much of the nation simultaneously reaches for the thermostat and turns up the heat? Energy prices rise.

With Americans shivering through a “polar vortex,” utilities and grid operators are scrambling to meet demand amid record low temperatures. A stressed power grid and constrained natural gas pipelines are already pushing up the price of electricity and natural gas on wholesale markets.

The good news is that consumers are relatively insulated from the polar vortex’s temporary price shocks (besides the obvious cost increase of turning the heat up for a prolonged period). The bad news is that if this is the first polar vortex of many to come, that prolonged grid strain and need for new infrastructure will almost certainly make its way into the bottom line of your monthly utility bill.

“Most retail customers are set up through regulated natural gas rates for this reason – so that short-term spikes in the spot price don’t automatically flow through,” says M. Tyson Brown, statistician at the US Energy Information Administration (EIA). “To the extent that this is a long-term trend – that really affects the price people pay.” Read the rest of this entry »