Weekly Basis Report 09/16/15
If you look at the chart below, you will see a lot of volatility in the short run and continuing all the to March and April 2016. This is more or less due to uncertainty in the market place where financial basis markets were mixed with Northeast prompt-month basis prices moving higher, while months further along the curve mostly fell. The NYMEX October natural gas futures contract fell 5.9 cents to settle at $2.651/MMBtu on expectations of a bearish weekly natural gas storage report.
DOE EIA Weekly Gas Storage Report 9/10/15
Working gas in storage was 3,261 Bcf as of Friday, September 4, 2015, according to EIA estimates. This represents a net increase of 68 Bcf from the previous week. Stocks were 473 Bcf higher than last year at this time and 127 Bcf above the 5-year average of 3,134 Bcf.
EIA estimated 72-76 Bcf
vs
Actual Injection 68 Bcf
A consensus of analysts surveyed by Platts expects the US Energy Information Administration on Thursday will estimate a natural gas storage injection of between 72 Bcf and 76 Bcf for the reporting week that ended September 4. A build within expectations would be less than the 90 Bcf injection reported at this time in 2014 but more than the 63 Bcf five-year average increase, according to EIA data. The wider range of analysts’ expectations for this week was for an injection of 69 Bcf to 81 Bcf. “Injection activity fell compared to the previous week within the East and Producing regions, as demand picked up on higher temperatures,” said Platts unit Bentek Energy in its Weekly Storage Report. Power demand rose by more than 1.6 Bcf/d compared with the previous week, Bentek said, mostly in the East Region. Most storage facilities reported smaller injections across the Midwest and Northeast.
DOE EIA Weekly Gas Storage Report
Working gas in storage was 3,193 Bcf as of Friday, August 28, 2015, according to EIA estimates. This represents a net increase of 94 Bcf from the previous week. Stocks were 495 Bcf higher than last year at this time and 122 Bcf above the 5-year average of 3,071 Bcf
EIA to estimate 83-87 Bcf
Actual 94 Bcf
An injection within that range would be more than the 79-Bcf build reported in the comparable week of 2014 and the 60-Bcf five year-average increase, EIA data showed. Discussing the possible effect of a high injection number Thursday, Santiago Diaz, broker at INTL FC Stone, said “if the large injection trend continues, it will translate towards more downward pressure on prices.” It is not unusual for natural gas storage injections to reach this size, but what is unusual is how early large injections are arriving. “With the third week of September traditionally marking the low point in the season for weather-related demand, this pattern change appears to be running close to schedule”
Weekly Basis Report
Here is the weekly basis report which is representing the future price change when trading natural gas, the quoted price is the difference between the Henry Hub price and a specific location’s price – called the basis price. A basis position is one that has exposure to two different locations: the Henry Hub and separate location’s price.
Here are some basic understanding on how to measure natural gas:
A BTU is the amount of heat required to increase the temperature of a pint of water (which weighs exactly 16 ounces) by one degree Fahrenheit.
Since BTUs are measurements of energy consumption, they can be converted directly to kilowatt-hours (3412 BTUs = 1 kWh) or joules (1 BTU = 1,055.06 joules).
MBTU stands for one million BTUs, which can also be expressed as one decatherm (10 therms). MBTU is occasionally used as a standard unit of measurement for natural gas, and provides a convenient basis for comparing the energy content of various grades of natural gas and other fuels.
One cubic foot of natural gas produces approximately 1,000 BTUs, so 1,000 cu.ft. of gas are comparable to 1 MBTU.
MBTU is occasionally expressed as MMBTU, which is intended to represent a thousand thousand BTUs
Cogeneration is not Deregulation
Indiana is in the midst of trying to address its high cost of electricity. Two trade associations are facing off; the industrial trade association wants to be able to build cogeneration plants (very efficient plants that produce electricity and heat) while the utility trade association doesn’t want competition on other energy sources. Both trade associations miss the evolution of energy deregulation.
Energy deregulation started during the oil crisis (late 1970s early 80s) and initially the “deregulation” manifested as competition on constructing new power plants. That is: before a utility could build a new power plant, it had to put out to bid what it was going to build and the price and see if others could build it for less and with different fuels.
The second phase of energy deregulation occurred with energy supply to customers (natural gas and electricity). First came large energy users followed over time by residential consumers. During this phase of energy deregulation, the utility became a delivery company and the energy supply (natural gas or electricity) could be purchased from the utility or other energy suppliers.
A review of the facts of energy deregulation over the last 30+ years illustrates:
- The utility model of regulated competition has been demonstrated to cost more than direct competition.
- Power plants should be sited to allow for the efficient use of its output (both the heat and the electricity)
- Customer should be allowed to choose their energy supply. Competition for retail customers in energy supply has demonstrated lower costs, improved efficiency and greater service options.
- Utilities should continue to operate their monopoly on energy delivery
Hopefully, the Indiana legislators review the history and benefits from energy deregulation.
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Supporting Article:
EIA Weekly Natural Gas Storage Report
Working gas in storage was 3,099 Bcf as of Friday, August 21, 2015, according to EIA estimates. This represents a net increase of 69 Bcf from the previous week. Stocks were 480 Bcf higher than last year at this time and 88 Bcf above the 5-year average of 3,011 Bcf.
EIA estimate 58-62 Bcf
Actual 69
A consensus of analysts surveyed by Platts expects the US Energy Information Administration on Thursday will estimate a natural gas storage injection of between 58 Bcf and 62 Bcf for the reporting week that ended August 21. An injection within expectations would be less than the 77-Bcf injection reported at this time in 2014 and similar to the 61-Bcf five-year average injection, according to EIA data. The wider range of analysts’ expectations for this week was for an injection of 47 Bcf to 67 Bcf. “US demand rose modestly from the previous week and averaged just above 64.5 Bcf/d during the week,” said Bentek Energy, an analytics and forecasting unit of Platts. “However, this did not translate to lower injection activity, as Bentek’s sample injections increased within both the East and Producing regions compared to the previous week.”
