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NYMEX

The June gas futures contract settled today at $2.47/MMBtu, about $0.08 higher than its settlement yesterday. By comparison, the 12 month strip settled at $3.09/MMBtu and next year’s winter strip (Nov 12 – Mar 13) is trading at $3.38/MMBtu.

Avoiding Oversupply this Summer

Storage levels nearly reached their estimated maximum capacity of about 4.1 Tcf last summer, and with storage levels currently almost 1 Tcf higher than their five year average, keeping storage from reaching capacity this summer is going to take some work. 

Many analysts say that NG prices need to remain around $2/Mcf in order to create enough demand (approximately 2 Bcf/d) to prevent a serious oversupply condition.

Dave Purcell, Tudor Pickering Holt Managing Director asserts that so long as the power sector continues taking advantage of the extremely low priced gas, enough demand should be generated for the gas in the short term.

As more alternative uses for natural gas are developed, including manufacturing, natural gas vehicles, LNG exports, and power generation, supply and demand should balance out and prices should rebound, likely trading between $3/Mcf and $4/Mcf. next summer.

Proppant Producers with Record High Profits

US Silica, a major producer of the proppants that keep the fissures in fracking wells open, just had the best quarterly results of their 112-year history.

The company sold 670,000 tons of proppants in its most recent quarter, up from 434,000 just a year ago. Revenues are up almost 65% and adjusted earnings are up 121% .

U.S. Silica serves as yet another example of how the natural gas industry continues to deliver benefits that extend beyond the industry itself, helping to strengthen the U.S. economy.

Weather

Temperatures in the Buffalo/Niagara region are expected to remain in the mid 50’s to low 60’s over the next five days with a high of 69 on Sunday, and a low of 43 on Thursday.

NYMEX

The June gas futures contract rallied 8.7 cents yesterday, settling at $2.34/MMBtu on news of a below average storage injection report from the EIA.

The June gas futures contract is currently trading at $2.29/MMBtu, about $0.05 lower than its settlement yesterday. By comparison, the 12 month strip is trading at $2.92/MMBtu and next year’s winter strip (Nov 12 – Mar 13) is trading at $3.23/MMBtu.

Natural Gas and Steel

The record low price of natural gas has been heavily impacting many areas of the energy industry, and the economy as a whole, with coal to gas switching in manufacturing facilities as one of the most prominent.

The U.S. steel industry has the largest potential to gain from this opportunity, while at the same time providing great benefits for the overall economy.

According to a report from Professor Timothy Considine, an energy economist at the University of Wyoming, not only does the industry support over one million jobs, for every job created in the industry, seven are created elsewhere in the economy.

Furthermore, steel is a critical component of natural gas exploration, production, and transportation, so as more natural gas is produced, steel will be in higher demand, thereby increasing the demand for natural gas in a mutually beneficial, yet somewhat unexpected relationship.

Storage – Surplus Declining

Working gas in storage was 2,576 Bcf as of Friday, April 27, 2012, according to EIA estimates. This represents a net increase of only 28 Bcf from the previous week. Analysts were anticipating an injection of 30-34 Bcf, despite a 5-year average increase of 79 Bcf.

Stocks dropped from 872 to 840 Bcf higher than last year at this time and from 908 to 857 Bcf above the 5-year average of 1,719 Bcf.

According to Tim Evans, Analyst at Citi Futures Perspective, “We expect to see another below-average storage injection for next week… Its only beyond that where we see more normal temperatures providing a test of how much the background supply/demand balance has actually tightened.”

Weather

This weekend will have a high of 69 degrees today, and a low of 42 Saturday night in the Buffalo/Niagara region. The weather is expected to remain mild and humid with scattered showers throughout the week.

NYMEX

The June gas futures contract is currently trading at $2.32/MMBtu, $0.05 lower than its settlement yesterday. By comparison, the 12 month strip is trading at $2.93/MMBtu and next year’s winter strip (Nov 12 – Mar 13) is trading at $3.22/MMBtu.      

EPA Official Armendariz Resigns After “Crucify” Comments

To nobody’s surprise, EPA official Al Armendariz resigned after a video from 2010 surfaced in which he detailed the EPA’s crusade against oil and gas companies.

In the video, Armendariz told staff members to focus their attention on one energy company in an attempt to “crucify” it, making an example for all other companies, in an effort to bring them all into submission.

The issue in this case wasn’t Armendariz’s choice of words, but rather that over the previous two years, the EPA has in fact been focusing much of its attention on Range Resources, attempting to destroy their reputation, and make other oil and gas companies nervous of the EPA’s apparent power.

The EPA did so by releasing negative findings about the safety of Range Resources fracking operations. However, just a few months later, they withdrew those statements as they were not based on legitimate scientific findings.

Aside from the EPA’s faulty study, all the evidence continues to indicate that there is no link between the process of hydraulic fracturing and ground water contamination.

Marcellus Producers to Continue Operations as Usual

The record low price of natural gas has driven some Marcellus producers out of the region. On Thursday however, two big Marcellus producers, Range Resources, and EQT Corp. vowed to continue producing as they have been despite the low margin on the gas their producing.

Although Bradford County has become well known as the major producing area in the Marcellus, many producers like Range Resources and EQT are looking towards Washington County in Northwestern Pennsylvania where there is a small area of very high Btu gas.

Weather

Temperatures in the Buffalo/Niagara region are expected to creep up near 80 degrees this week with a high of 76 on Thursday. Temperatures are expected to remain relatively warm for the next 10 days, a sign that summer has finally arrived.

NYMEX – Back Above $2.00

The May gas futures contract expired yesterday at $2.036/MMBtu.

The new prompt month, June is currently trading at $2.14/MMBtu, another $0.02 higher than its settlement yesterday. By comparison, the 12 month strip is trading at $2.80/MMBtu and next year’s winter strip (Nov 12 – Mar 13) is trading at $3.10/MMBtu.

LNG Exports Unlikely to Cause Price Spike

Peter Robertson, a senior advisor for oil and gas at Deloitte, spoke on Tuesday about the effect exporting natural gas will have on NG prices. According to Robertson there will be a “very, very small effect on prices.”

Robertson, like many other analysts, estimates that if the United States exports 6 Bcf/d, prices will only increase by about 17 cents. The U.S. produces more than double the market for LNG, so while 6 Bcf/d would account for 10% of current domestic production, it would increase global supplies by 20%.

Source: seanews.com

“It is big shocks to the system and sudden changes in supply-demand that cause prices volatilities,” Robertson reasoned. When the market has a long time to adjust and prepare for changes, the effect won’t be as significant.

Storage – Approaching 1 Tcf Above 5-year Average

Working gas in storage was 2,548 Bcf as of Friday, April 20, 2012, according to EIA estimates. This represents a net increase of 47 Bcf from the previous week. Stocks are now 872 Bcf higher than last year at this time and 908 Bcf above the 5-year average of 1,640 Bcf.

Weather – Hurricane Forecast

The cold weather is almost behind us, which means the Atlantic hurricane season will be approaching soon. Forecasters at Weather Services International are estimating there will be 11 named storms from when the season officially begins on June 1, through its conclusion on November 30.

Only two of these storms are expected to reach category three or higher, and none are expected to make landfall, but it is clearly too early to determine how any of these will affect natural gas production.

NYMEX Reaches Another 10-Year Low

The May gas futures contract settled another 6.5 cents lower yesterday at $1.95/MMBtu. This is the lowest settlement for a prompt-month contract since January 28, 2002, when it settled at $1.91/MMBtu.

The May gas futures contract is currently trading at $1.948/MMBtu, $0.003 lower than yesterday’s settlement. By comparison, the 12 month strip is trading at $2.61/MMBtu and next year’s winter strip (Nov 12 – Mar 13) is trading at $3.02/MMBtu.

Consumers Very Satisfied with Energy Providers

According to a survey by the American Customer Satisfaction Index, consumer satisfaction with natural gas and electric service providers is at an all-time high.

A very mild winter has lowered natural gas prices and reduced overall energy consumption needs, keeping the typical households energy bills relatively low, and customer satisfaction very high compared to years before.

Atlantic Access to Increase Capacity by 500,000 Dt/d

Williams Partners has increased the expected capacity of the planned Atlantic Access gas pipeline from 1.8 million Dt/d to 2.3 million Dt/d. This expansion will bring Marcellus Shale gas from Northern Pennsylvania to the Northeast, Mid-Atlantic, Southeast, and Gulf Coast Regions.

Storage – “No Quick-Fix”

Working gas in storage was 2,487 Bcf as of Friday, April 6, 2012, according to EIA estimates. This represents a net increase of just 8 Bcf from the previous week. Stocks are still 888 Bcf higher than last year at this time and 920 Bcf above the 5-year average of 1,567 Bcf.

Speakers at the LDC Gas Forum Southeast in Atlanta, recently spoke about the unprecedented storage levels and indicated there may be no “quick-fix” for the oversupply condition affecting the market.

Most of the new sources of NG demand (power generation, NG vehicles, and exportation) are still years away from having a significant impact on natural gas storage levels.

Summer Weather Around the Corner

Temperatures in the Buffalo/Niagara region are expected to reach 67 degrees on Thursday with similar temperatures on Friday. This weekend however, is expected to be slightly cooler with highs of 46 and 44.

NYMEX at New 10-Year Low

The May gas futures contract settled another 7.6 cents lower yesterday at $2.03/MMBtu. This is the lowest settlement for a prompt-month contract since January 29, 2002, when it settled at $2.006/MMBtu.

The May gas futures contract settled today below $2.00 at $1.98/MMBtu, another $0.05 lower than yesterday’s settlement. By comparison, the 12 month strip settled at $2.69/MMBtu and next year’s winter strip (Nov 12 – Mar 13) settled at $3.13/MMBtu.

EIA Lowers Natural Gas Price Forecast

One month ago, the EIA estimated that second quarter Henry Hub prices would average $3.10/MMBtu. Now, due to continued supply growth and significantly lower weather-driven demand, they estimate second quarter prices will average $2.20/MMBtu.

The EIA’s outlook for 2012 has also dropped from $3.17/MMBtu to $2.51/MMBtu.

Record Low NG Prices Re-shaping the Industry

The extremely low price of natural gas is changing the industry in many ways. First of all, many petrochemical, steel, and fertilizer producing companies are bringing manufacturing jobs back to the United States where natural gas can more cost effectively power their plants.

Also, numerous trucking fleets are switching from gasoline to natural gas powered trucks that are less expensive to operate and burn cleaner.

Picture from BuffaloNews.com

Finally, many electric utilities are switching to natural gas, not only because of lower costs, but because natural gas is expected to meet the standards of new potential regulations limiting greenhouse gas emissions from new power plants, while coal is expected to have a much more difficult time.

Storage

Working gas in storage was 2,479 Bcf as of Friday, March 30, 2012, according to EIA estimates. This represents a net increase of 42 Bcf from the previous week. Stocks were 887 Bcf higher than last year at this time and 934 Bcf above the 5-year average of 1,545 Bcf.

Warmest March Ever

According the National Oceanic and Atmospheric Administration, March 2012 will go down in history as the warmest March ever recorded since the organization began taking records in 1895.

The weather patterns thus far this year are good indicators that this will be one of the warmest summers ever recorded

NYMEX – Now at 10 Year Low!

The April gas futures contract is currently trading at $2.30/MMBtu, about equal to its settlement yesterday. By comparison, the 12 month strip is trading at $2.90/MMBtu and next year’s winter strip (Nov 12 – Mar 13) is trading at $3.33/MMBtu.

EPA Doubts Results of Own Study

The EPA’s recent study indicating that hydraulic fracturing was to blame for groundwater contamination in Pavillion, Wyoming has come under scrutiny from numerous oil and gas industry leaders, and now even from the EPA itself.

The EPA, in a statement on Friday said “The EPA, the State of Wyoming, and the Tribes recognize that further sampling of the deep monitoring wells drilled for the Agency’s groundwater study is important to clarify questions about the initial monitoring results.”

In other words, the initial results were released too quickly, and before any legitimate scientific conclusion could be drawn from them.

Future studies in the area should take into consideration the poor quality of water the area has always been known for, even decades before any fracking was performed in that region.

Natural Gas Continues to gain ground on Coal.

Sub $3.00/MMBtu natural gas prices continue to entice US power producers to utilize NG instead of coal.

Recent data from Tudor Pickering Holt analysts indicates that power plants will be burning 6 Bcf/day more of natural gas by the end of 2012 than they were in 2010.

Storage

Working gas in storage was 2,433 Bcf as of Friday, March 2, 2012, according to EIA estimates. This represents a net decline of 80 Bcf, from the previous week.

Stocks are now 739 Bcf higher than last year at this time and 792 Bcf above the 5-year average of 1,641 Bcf.

Weather

Temperatures in the Buffalo/Niagara region are expected to remain in the 60’s to 70’s for much of this week. This continues the unprecedentedly warm winter the region has seen.

NYMEX Settles 11 Cents Higher

After an up and down trading day on Thursday, the NYMEX settled 14.2 cents higher than it opened, and the trend continued Friday rallying another 11.7 cents, settling at $2.684/MMbtu

Thursday’s storage report, the EIA’s storage predictions, and Friday’s announcement that Encana will be reducing production by 600,000 Mcf/d due to low NG prices, are what many analysts believe to be the major contributing factors to the NYMEX’s sudden climb.

The March gas futures contract is currently trading at $2.615/MMBtu, about $0.07 lower than it settled yesterday. By comparison, the 12 month strip is trading at $3.14/MMBtu and next year’s winter strip (Nov 12 – Mar 13) is trading at $3.59/MMBtu.

Texas Study: No link between Fracking and Water Contamination

Researchers at the University of Texas at Austin recently released the results of a study indicating no direct link between any reported cases of ground water contamination and the process of hydraulic fracturing.

Like numerous studies before, the evidence indicates that any contamination was most likely a result or poor drilling practices performed in the past, and not the process of Fracking itself.

When performed responsibly, meaning that all cement casings are secure, all wastewater is properly disposed of, and rig integrity inspections are routinely performed, Hydraulic Fracturing is an absolutely safe process that will allow the United States to reduce dependence on foreign oil and keep domestic energy costs low.

Storage

Working gas in storage was 2,761 Bcf as of Friday, February 10, 2012, according to EIA estimates. This represents a net decline of 127 Bcf from the previous week, slightly above the estimate of between 116 and 120 Bcf.

Despite the higher than expected withdrawal, stocks are still 817 Bcf higher than last year at this time and 765 Bcf above the 5-year average of 1,996 Bcf.

The EIA’s prediction of larger than expected withdrawals in the coming weeks is mainly a result of “storage ratchets,” which are contractual obligations to withdraw a pre-determined proportion of gas.

Weather

Temperatures in the Northeast are expected to climb up into the 40’s throughout the week, dropping down below freezing for this weekend.

“The benefits of a CNG Fleet Seminar” 
presented by CNG for Upstate NY

U.B. Center for Tomorrow

101 Center for Tomorrow

Buffalo, NY 14260

Thursday February 23, 2012

8:30 AM - 10:30 AM

FREE Event & Free Parking

Low NG Prices Slowing Marcellus Production

With natural gas prices still hovering around 10-year lows, some companies are beginning to cut back on production in the Marcellus Shale.

BG Group announced Thursday that they plan on reducing their rig count from 35 to just 8 by the end of 2012. According to CEO Frank Chapman, “What we’re doing with shale gas is rational in response to low prices in the U.S.”

NYMEX Rallies

BG’s announcement on Thursday, along with other companies planned cuts in production, caused the NYMEX to rally 2.9 cents yesterday, settling at $2.477/MMbtu.

The NYMEX rally is expected to be short lived however, because BG’s announcement will have no immediate impact on supply, and natural gas prices are still expected to remain at the low to mid $2.00 range for the much of the year.

The March gas futures contract is currently trading at $2.47/MMBtu, about equal to its settlement yesterday. By comparison, the 12 month strip is trading at $3.07/MMBtu and next year’s winter strip (Nov 12 – Mar 13) is trading at $3.54/MMBtu.

Storage

Working gas in storage was 2,888 Bcf as of Friday, February 3, 2012, according to EIA estimates. This represents a net decline of just 78 Bcf from the previous week

Stocks are now 714 Bcf higher than last year at this time and also 714 Bcf higher than the 5-year average of 2,174 Bcf.

The EIA projects that end of winter storage levels will be the highest they have been since 1983, due largely in part to unusually warm temperatures coupled with increased domestic production.

Weather

The chart below from the Northeast Regional Climate Center at Cornell University shows how far above average, in degrees Fahrenheit, different parts of the northeast have been from December 1, 2011 through January 29, 2012.