Injection Season is Over – Stockpiles Higher than Expected
As of today’s storage report, storage levels are at 3,359 Bcf, which is shows a withdrawal of 212 Bcf since our November Energy Outlook. Withdrawal season has begun. At current levels, we go into this winter 351 Bcf under the 5-year average. Being 10% below historic levels places the market at risk if near term cold temperatures strip away the smaller storage stockpiles. Currently, December temperatures are predicted to be mild and small withdrawals may not stress storage levels or have a large impact on price.
Near Term Mild Temps - 2015 Brings Colder Temps to the South
December tmperatures have been mild, bringing much rain to both coasts. The first quarter of 2015 looks to deliver above average temperatures in the West and in far Northeast. Below average temperatures are predicted for most of the South and Southeast; ranging from New Mexico to Virginia. The Midwest, Central Plains, Ohio Valley and Mid-Atlantic are predicted to have normal winter temperatures.
Near-term temperatures will be critical to energy prices going into 2015. Any cold snap may result in earlier and stronger natural gas withdrawals than expected; causing prices to increase.
The January 2015 gas contracts gained this week, settling at $3.652/MMBtu. Traders took advantage of oversold conditions, which resulted in Monday’s drop under $3.60/MMBtu, to cover short positions in anticipation of a colder January. Much of the bounce back up is attributed to technical support at the $3.60 level. Congrats to everyone who was positioned and ready to capitalize on Monday’s price dip.
So far, December has been much warmer than originally expected. Normal to above-normal temperatures are expected to continue until at least Christmas, which is nothing like the below-normal temperatures originally forecast for December. January and February are still forecast to be below-normal, yet not quite as cold as last winter. The big question is … “when the cold eventually materializes, will prices rally due to increased demand for natural gas or will storage be enough to stabilize prices?”
Remember Natural Gas Spot Prices from Last Year (Henry Hub)?
ElectricityThe latest energy challenge has occurred on the electric side. Most Northeast states will see huge increases in default electric rates. Some have already gone into place and most will start on January 1st. Below is a table of the Northeast states and their approved default service rate increase. If you are on default service your price will go up. Give AUM a call to help you avoid these price jumps. You can easily avoid these price increases through our energy procurement services.
Mild December Weather has Offset Low Storage Levels
The mild December weather has dampened the typical seasonal price jump. We have experienced periods of price dips, enabling prepared buyers to take advantage. Some concern exists with storage levels 10% below the 5-year historic average.
Time is running out to lock in fixed natural gas prices for this winter. Waiting until after Christmas will force you to be exposed to market prices in January and possibly February; the most volatile gas price months. Take Action NOW, or roll the dice on winter gas prices.
Default Electric prices will be going up significantly in the Northeast. Almost all NE states have approved rate increases in place or set to become effective on January 1st. Start locking in your energy now to avoid those ugly default rates.