Plugging into Multifamily - The Official Blog of AUM

January Energy Outlook

Posted by Alison Hoss on Tue, Jan 13, 2015 @ 04:23 PM

Jan15_Intro

Natural Gas Storage

Mild December Weather Curbs Withdrawals -  Storage Levels Finally within 5-Year Average Range 

As of EIA’s December 26th Storage Report, storage levels were at 3,220 BCF; 232 BCF above the same period in 2013, yet still below the 5-Year average by 3%.  The current 3,220 BCF storage level marks the first time since November, 2013 in which total working gas is within the 5-year historic range (the gray band shown on the chart below). We started this withdrawal season at a 10% deficit below historic 5-year averages.  Due to our mild December, withdrawals have been small and have not bled reserves like last December and January.

Jan15_Storage_Table

Working Gas in Underground Storage Compared with the 5-Year Maximum and Minimum - Billion Cubic Feet

Jan15_Storage_Graph

 

Weather Forecast: Colder Temperatures for the South 

January has started out with frigid cold, but is expected to end mild throughout most of the US.  Only Texas and the Central States are predicted to experience below-normal temperatures.

The long-range forecast show below-normal temperatures for Texas through Virginia.  The West Coast will experience above normal temperatures.

Jan15_Temp_Outlook

 

Energy Prices

Natural Gas

December was a great month for energy prices. Warm temperatures dampened the heating demand for natural gas and record high gas production applied downward pressure to energy prices; causing natural gas prices to drop 6% and electricity prices dropped 1%. The last two weeks of December were significant with the NYMEX average 12-month price for natural gas closing down 12% and the PJM 12-month average price for peak power dropping 7%.

February natural gas contracts continued to fall to $2.882/MMBtu, despite the cold spell in early January reaching across most of the country.  This week’s cold temps are expected to end and a return to above-normal temperatures is expected.  Short-Term cold spells should be expected, but unlike last winter, they are not expected to last for extended periods.

 

Jan15_Natural_Gas_Prices

Electricity

As natural gas prices go, so follows electricity prices.  Most all electric markets have seen a corresponding dip in prices; however not as noteworthy.  Our biggest concern today on the electric front comes from significant increases on the utility standard/default service rates.  Large increases have been enacted in the Northeast and Midwest.

Bottom Line

Mild December Weather Offsets Low Storage Levels

This Holiday Season brought us three gifts: mild December temperatures, limited storage withdrawals, and record gas production levels throughout  the injection season. The combination of these events has offset lower-than-normal storage levels. As a result, natural gas prices fell to the lowest levels in 2 years, down 35% since November.  At a time when prices usually escalate ahead of the peak season for heating demand, the warmer-than-normal December and record production has limited storage withdrawals.

 

Tags: Energy cost, Energy procurement, Multifamily, Energy market, EnergyBlogs, energy benchmarking

December Energy Outlook

Posted by Alison Hoss on Mon, Dec 15, 2014 @ 02:32 PM

December_Energy_Outlook___1

December_Energy_Outlook__2

 

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. 

December_Energy_Outlook_3

Weather Forecast

Near Term Mild Temps - 2015 Brings Colder Temps to the South

Temperature Outlook

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.

December_Energy_Outlook_4

December_Energy_Outlook_5

Energy Prices

Natural Gas

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)?

December_Energy_Outlook_6

Electricity

The 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.

December_Energy_Outlook_7

 

Bottom Line

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.

Tags: Energy procurement, Energy market, Energy Efficiency

Utilities are Installing Smart Meters; But Who Owns the Data?

Posted by Alison Hoss on Wed, Sep 24, 2014 @ 11:16 AM

 

Over the past few months, we’ve all been inundated with reports on the new Apple iPhone 6 release and all of the new features it has to offer.  It got me to think about all the data that travels through the air, across phone lines and over the internet; and about all the new devices that are being used to gather and send all the data.   The Internet of Everything (IoE) phenomenon, which is the next big wave of how people and things connect to the internet, is growing exponentially.  IoE applications (often Machine-2-Machine applications) include: smart meters, video surveillance, smart cars, package tracking chips, chipped pets and livestock, and digital health monitors.  Today, there are over 2.9 Billion M2M connections and they are projected to grow to 7.3B by 2018. 

But what about the business aspect of all these new devices and resulting data: 

1)    Who Owns the Data? 

2)    Who has Rights to transform the data into valued information?

In the utility world, these are hot topics.  Recently in Chicago, ComEd installed 425,000 smart meters as part of its $2.6B grid-modernization project; that number of smart meters is planned to grow to over 4 million meters.  The list of companies wanting access to the data is almost as long as the number of meters themselves, but no data is flowing.  No one is able to see the benefits of energy efficiency as a result of the new energy information gathered via the smart meters.  Why?  Because regulators are still determining who owns the data (the utility or the customer) and how data is to be released in order to comply with privacy laws.

The US Department of Energy (DOE) has established  the “Green Button” as the standard for smart meter data access by customers.  Green Button is a good start.  However, the local utility is the only one who presents the energy data to the customer and only in the format or manner that the utility chooses.  In order to enable the markets to develop products and services around smart meter data, rules must be established to enable easier access to the data for enterprising business as well as property managers like you.

At AUM, we are fortunate to gather all of the utility data from your invoices as a part of our invoice processing service.  On the AUM Advanced Analytics Platform, clients get instant access to their information via a myriad of on-line reports, a first-glance Performance Dashboard with data drill-down capabilities, and other self-serve Ad Hoc Reporting Tools.  

But the next generation of data coming from smart meters has yet to be made easily available to customers and energy solution providers.  AUM’s question to you is:  How should AUM advocate on your behalf to ensure the data is most accessible to you?  What is the best solution to gather your residents’ utility data?  Do you want to access your residents’ usage data in order to help them become more efficient (and enable your properties to become more energy efficient)?

 

Tags: Energy procurement, Multifamily, Utilities, Submetering, utility expense recovery, Energy Efficiency, Data analysis, Data collection, Data capture, energy expenses, analytics

Energy Commodity Outlook - December, 2013

Posted by Dimitris Kapsis on Thu, Dec 12, 2013 @ 09:47 AM

Outlook

We continue to believe that the risk of higher pricing for both natural gas and electric supply outweighs any pricing downturn opportunities.  For clients still having exposure to both electric and natural gas market pricing for the upcoming winter months we highly recommend covering their positions for the short term.  If all goes well with temperatures, natural gas storage inventories and production, we could see buying opportunities in late February/early March.  Clients should highly consider longer positions in the market with 18-, 24- or even 36-month terms.

 

Natural Gas Storage

Given the current extreme weather gripping most of the Nation, many in our industry are wondering if the high natural gas inventories in storage and the record high dry gas production numbers of the past several weeks offer enough support for the upcoming winter heating demand.  A reminder of the upcoming winter season was given to us with the arctic blast engulfing the Eastern two-thirds of the country and the foul weather spoiling travel plans for many Americans.  In Chicagoland we are currently experiencing 20-degree daytime temperatures, usual weather for us, but not until late January.  Since our last report we have experienced the first withdrawals from the national natural gas storage. 

Last week the Energy Information Administration (EIA) reported a low natural gas storage withdrawal of -13 Bcf; a figure within the analyst’s expectations, yet pricing went up.  Natural gas in storage is currently at 3.776 Tcf, 17 Bcf above the five year average figure and only 100 Bcf below last year’s record setting levels.

12.13 Hubspot storage graph

Temperature Outlook

The National Oceanic & Atmospheric Administration, commonly known as NOAA has issued preliminary winter temperature forecasts calling for above normal temperatures for New York, New England and Texas while the Midwest and Midatlantic should expect normal temperatures.  Normal temperatures sound like a favorable forecast but we do need to keep in mind that the past two winters registered above normal temperatures.

12.13 Hubspot  Winter temps

 

Natural Gas Production & Pricing

Our national dry natural gas production continues to exceed last year’s levels; we continue on the year- over- year higher production of 2.5 Bcf per day.  It appears that the magic price for the coal to natural gas switch made by many electric generators is still at the $4 per MMBtu mark; recent market pricing approaching this threshold will test this theory.  In addition coal prices are still at their lowest point over the last three years so the incentive for electric generators to switch to an alternate fuel such as natural gas has diminished.

Last week the December 2013 natural gas contract settled at a price of $3.818 per MMBtu, an uptrend compared to the last four months.  The NYMEX Natural Gas price settle curve depicted below includes a polynomial trend line (red line) which shows a sustained upward pricing curve.  Despite the above forecast storage inventory reports over the last couple of weeks, the NYMEX forward natural gas futures contracts have not reacted with substantial pricing downtrends.  On Cyber Monday, the January gas futures contract settled at $3.988 per MMBtu, approaching the $4.00 psychological mark.  For the market to experience a substantial drop with a sustainable duration will require December and possibly January to experience above normal temperatures, for production levels to remain at current record highs and industrial load to remain as is without any major capacity increases.

12.13 Hubspot  Gas Settle

 

Bottom Line

Currently the 12-month average forward pricing curve for natural gas is at $3.995 per MMBtu, compared to last month’s $3.697 per MMBtu price.  In addition the four month pricing curve for the upcoming heating season, December 2013 through March 2014, receded a little to $3.93 from last month’s $3.64 per MMBtu.  The effect of the upcoming cold weather on the market pricing is obvious.  As stated last month the market appears to be bouncing off a bottom threshold and several buyers have taken advantage of recent lower pricing in order to cover their positions for the upcoming winter loads.  Several energy executives continue to project that the natural gas market will continue to fluctuate in the $3.50 to $4.00 per MMBtu range for the first part of 2014.

The fact still remains that natural gas and electric prices continue to trade higher than a year ago.  Natural gas production is at an all-time high even though the natural gas rig count has reduced by 13% compared to last year.  Advances within the shale gas industry have increased production levels to record highs. We continue to have minimal demand and the record high production levels are keeping energy pricing in check.  Both the natural gas and electric pricing are currently trading near their second-lowest levels in the last decade. Hurricane activity was non-existent this season but the winter heating season of 2013-2014 is just starting.

Tags: Energy cost, Conservation, Energy budgeting, Energy procurement, Energy rates, Utility rate schedules, Energy Information Administration, Multifamily, Energy Commodity Purchasing

Energy Commodity Outlook - October, 2013

Posted by Dimitris Kapsis on Wed, Oct 09, 2013 @ 11:41 AM

Outlook

We continue to believe that the risk of higher pricing for both natural gas and electric supply outweighs any pricing downturn opportunities.  We are currently experiencing a buying opportunity, clients should seriously consider covering their winter electric and natural gas exposure if they have not done so already.  If all goes well with temperatures, natural gas injections and the hurricane season, we could see buying opportunities last through October.  Clients should consider longer positions in the market compared to shorter 12- or 18-month deals.  We are seeing competitive pricing for 24- and even 36- month terms due to the lower capacity charges.

Natural Gas Storage

It’s Autumn, and shoulder season has arrived. But higher than normal temperatures have remained throughout the country.  Last week temperatures in Chicagoland reached as high as 85 degrees, in October!!  But no complaints here considering that the days are getting shorter, the nights are getting longer and the temperatures will soon follow their natural downward path.  On September 30, the Energy Information Administration (EIA) reported a natural gas storage injection of 101 Bcf; a figure above the analysts’ expectations yet pricing was not affected much.  Natural gas in storage is currently at 3.487 Tcf, 49 Bcf above the five-year average figure and only 155 Bcf below last year’s record setting levels.

Natural Gas Storage: Storage Buildup
Continues on Strong Pace During September

October Storage Tables resized 600

 

Natural gas storage inventories are still lower than last year’s levels, but the variance continues to shrink at a faster pace.  Injections over the last couple of weeks have surpassed expert forecasts.  Today’s injection report of 101 Bcf for the week ending 9-27-2013 was much higher than last year’s injection of only 77 Bcf.  The traditional storage injection season runs through October 31st so we have at least four more storage injections forecasted to continue strong; expectations still stand for the natural gas market to possibly loosen up a little more before the onset of the heating season.

October Storage resized 600

Temperature Outlook

Weather forecasts for October and November are indicating that the majority of the country will experience normal to above normal temperature patterns.  We have also learned that the scheduled nuclear plant maintenance shut downs for this fall are substantially lower than the rolling average.  These two factors could potentially help the market by reducing natural gas usage for both electric generation and heating loads allowing natural gas storage inventories to build to near or above record levels before winter temperatures set in.  Last week we had our first Tropical Storm, named “Karen”, which luckily did not become a hurricane before hitting the natural gas producing area of the Gulf.  We are not done yet with the Hurricane season.

 

Natural Gas Production and Pricing

 

Our national dry natural gas production continues to exceed last year’s levels; we are currently at 2.5% above last year.  It appears that the magic price for the coal to natural gas switch is the $4 per MMBtu mark; sustained pricing above the mark means that power plants will continue to burn coal while sustained pricing below that mark is a good incentive for generators to fire up their natural gas units.  Currently coal prices are at their lowest point over the last three years so the incentive for electric generators to switch to an alternate fuel such as natural gas has diminished.

There have been several articles and reports stating that tight natural gas supply balance in the Northeast and especially in the New England area are driving forward-basis pricing much higher than the rest of the country.  Winter forward prices at the Algonquin Gas Transmission city-gates, a highly constrained and often volatile New England hub, are averaging $8 per MMBtu year to date, a 31% increase compared to last winter.  Even without any clear forecast for the upcoming winter’s temperatures the pricing for basis (capacity coverage) is heading higher and higher every day.  Last November spot prices at Algonquin city-gates jumped by $4.10 per MMBtu within a week’s period.  This year it could get even more volatile.

On Friday, September 27th the October 2013 natural gas contract settled at a price of $3.498 per MMBtu, a slight improvement over the September settle.  The NYMEX Natural Gas price settle curve depicted below includes a polynomial trend line (red line) which shows a sustained upward pricing curve.  Despite the above forecast storage inventory reports over the last couple of weeks, the NYMEX forward natural gas futures contracts have not reacted with substantial pricing downtrends.  It appears that natural gas pricing is bouncing off a bottom threshold. Any pricing downtrend will be small and brief but an uptrend could be large and much longer.

October Gas Settle resized 600

 

Bottom Line

Currently the 12-month average forward pricing curve for natural gas is at $3.789 per MMBTU, compared to last month’s $3.873 per MMBTU price.  In addition the five month pricing curve for the upcoming heating season, November 2013 through March 2014, receded a little to $3.77 from last month’s $3.885 per MMBTU.  For all practical purposes, the heating season is around the corner.  As stated last month the market appears to be bouncing off a bottom threshold and several buyers have taken advantage of the recent lower pricing in order to cover their positions for the upcoming winter loads.  Several energy executives project that the natural gas market will continue to fluctuate in the $3.5 to $4 per MMBTU range for the rest of the year.

The fact remains that natural gas and electric prices continue to trade higher than a year ago, but they are still close to the lowest levels of the last ten years set back in May of 2012.  The recent development of shale gas production has provided some protection against extreme pricing spikes usually accompanying the hurricane season, but a large region of our country, the Northeast, inclusive of the NYC area and New England, has remained very volatile due to high dependence on natural gas for electric generation and capacity constraints.  A coastal storm such as Sandy or a sustained winter storm with snow accumulation and Arctic temperatures could create major disruptions and substantial price spikes particularly for these markets.

We continue to believe that the risk of higher pricing for both natural gas and electric supply outweighs any pricing downturn opportunities.  Clients should seriously consider covering their winter electric and natural gas exposure if they have not done so already.  If all goes well with temperatures, natural gas injections and the hurricane season, we could see buying opportunities last through October.  Clients should consider longer positions in the market compared to shorter 12- or 18-month deals.  We are seeing competitive pricing for 24- and even 36- month terms due to the lower capacity charges.

Tags: Energy cost, Conservation, Energy budgeting, Energy procurement, Energy rates, Utility rate schedules, Energy Information Administration, Multifamily, Energy Commodity Purchasing

Energy Commodity Outlook - August 2013

Posted by Dimitris Kapsis on Mon, Aug 12, 2013 @ 09:30 AM

Outlook

We continue to believe that the risk of higher pricing for both natural gas and electric supply outweighs any pricing downturn opportunities.  Since we are currently experiencing a buying opportunity, clients should consider covering some or all of their electric and natural gas exposure for the remaining summer loads if they have not done so already.  If all goes well with temperatures, natural gas injections and the hurricane season, we could see additional buying opportunities in the late September early October timeframe.  At that point clients should highly consider longer positions in the market compared to shorter 12- or 18-month deals.  We are seeing competitive pricing for 24- and even 36- month terms due to the lower capacity charges.

 

Natural Gas Storage

July 2013 gave us a real taste of summer heat throughout the country. Power plants were working overtime and the need for natural gas was very high.  On Thursday, August 1st the Energy Information Administration (EIA) reported a natural gas injection into storage of 59 Bcf, slightly above the analysts’ expectations.  As a result natural gas in storage is currently at 2.845 Tcf, 34 Bcf below the five-year average figure and 368 Bcf below last year’s level.


Gas Injection August

 Natural gas storage inventories are still lower than last year’s levels, and the five year average, but the variances continue to shrink with every week’s storage report.  Most of the country experienced a heat wave in the middle of July that directly affected natural gas storage injections but as shown with the latest injection as soon as the weather returned back to normal temperatures the numbers bounced up immediately.  This week’s injection of 59 Bcf more than doubled last year’s injection of only 28 Bcf, and was 25% higher than the five-year average of 47 Bcf. 

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The traditional storage injection season runs through October 31st , so we have three months left with storage injections forecasted to continue strong, and expectations still standing for the natural gas market to possibly loosen up further.

 

Temperature Outlook

The weather forecasters missed the extended July 2013 heat wave that resulted in 120-degree temperatures in the Southwest and Chicago areas. Believe me, having lived in the Washington, DC area for more than twenty years and currently residing in the Western Suburbs of Chicago, it was definitely a flash back; who doesn’t love a 90-degree day with 75% humidity and a heat index above 100?  This month’s report will not include a weather forecast because most likely it would miss its mark anyway.  We still have two full months of summer temperatures and the hurricane season will be entering its peak period.

 

Natural Gas Production and Pricing

Natural gas production continues to nationally exceed last year’s levels; we are currently at 2.5% above last year.  It appears that the magic price for the coal to natural gas switch made by many electric generators is the $4 per MMBtu mark. Sustained pricing above this mark means that the power plants will continue to burn coal, while sustained pricing below that mark is a good incentive for generators to fire up their natural gas units.  When we have a situation of high electric demand such as the heat wave that covered most of the US a couple of weeks ago, the generators do not have a choice but to fire up their peak units which are predominately natural gas driven.

On Tuesday, July 30th the August 2013 natural gas contract settled at a price of $3.459 per MMBtu, a drop from the July settle.  The NYMEX Natural Gas settle curve depicted below includes a polynomial trend line (red line) which shows a sustained upward pricing curve; we are hoping the latest pricing break will allow for a reversal by the end of the summer season.

describe the image

  

Bottom Line    

Currently the 12-month average forward pricing curve for natural gas is at $3.69 per MMBtu, compared to last month’s $3.785 per MMBtu price.  In addition the five month pricing curve for the upcoming heating season, November 2013 through March 2014, dropped to $3.72 from last month’s $3.85 per MMBtu.  The heat wave experienced by the majority of the country in mid-July had its temporary effect on pricing, but the current lower-than-average temperatures have caused pricing to drop.  As stated last month, the market appears to be bouncing off a bottom limit and several buyers have started to take advantage of the current low pricing in order to cover their positions for the upcoming winter loads.  Several energy executives project that the natural gas market will continue to fluctuate in the $3 to $4 per MMBtu range for the rest of the year. 

The fact still remains that natural gas and electric prices continue to trade higher than a year ago, but they are still close to the lowest levels of the last ten years set in May of 2012.  The recent development of shale gas production has provided some protection against extreme pricing spikes usually accompanying the hurricane season, but a large region of our country, the Northeast (inclusive of the NYC area and New England) has remained very volatile due to high dependence on natural gas for electric generation.  A coastal storm such as Sandy could create major disruptions and substantial price spikes particularly for these markets.


Tags: Energy cost, Energy consumption, Conservation, Energy budgeting, Energy procurement, Energy rates, Utility rate schedules, Energy Information Administration, Multifamily, Energy Commodity Purchasing, Energy market

Urgent Energy Commodity Alert - Price Spike for Electric and Natural Gas Expected Today

Posted by Dimitris Kapsis on Thu, Jul 18, 2013 @ 12:35 PM

Electric and Natural Gas Commodity Pricing is Reacting to Current Heat Wave

 

The natural gas storage injection reported today by the Energy Information Administration (EIA) was at 58 BCF, well below the projected injection of 66 – 70 BCF.  This news, together with the current heat wave gripping the majority of the US, will present an opportunity for the energy commodity pricing Bulls to push natural gas and electric pricing higher.  The impact of the expected price increases will be felt mostly by those currently on index contracts, especially in markets such as Chicago, New York City, Washington, DC and Boston.  These markets carry hourly index pricing and react to changes almost instantly. 

We recommend you curtail electric usage as much as possible during high usage periods (12:00 noon to 4pm daily) by reducing ancillary loads and adjusting space temperatures accordingly. 

Current market trends may warrant a review of existing index pricing contracts and an evaluation of budget risk tolerance for absorbing unexpected events such as this.

Tags: Energy cost, Energy consumption, Conservation, Energy budgeting, Energy procurement, Utility rate schedules, Energy Information Administration, Multifamily

AUM Energy Outlook - July 2013

Posted by Dimitris Kapsis on Mon, Jul 08, 2013 @ 11:52 AM

 

Natural Gas Storage

June 2013 was a month of normal to below average temperatures in the Northeast and Midwest and fairly wet.  For once weather forecasts came to fruition and natural gas pricing followed the expected related downturn.  On Thursday, June 27th the Energy Information Administration (EIA) reported a natural gas injection into storage of 95 Bcf, in line with analysts’ expectations.  As a result natural gas in storage is currently at 2.533 Tcf, 31 Bcf below the five-year average figure and 522 BCF below last year’s level.

Gas Injection July resized 600 

Natural gas storage is still lower than last year’s levels and the five-year average but the variances are consistently shrinking with every week’s storage report.  During June the natural gas storage buildup reached 392 Bcf compared to last year’s same period buildup of only 250 Bcf.  If the storage injections continue at the same pace we should see the natural gas market loosening up further.  As forecasted last month the first triple-digit storage injection of the season was made the week of June 3rd; ahead of the five-year average and last year’s same period injection.

July Storage resized 600

 

Temperature Outlook

July and August temperatures for the Northeast and Midwest are projected to stay within normal to slightly above normal ranges.  Lower air conditioning demand should help keep energy pricing down and allow for higher than average injections to boost natural gas storage figures.  Both regions experienced large increases in natural-gas electric generation last year.  Due to higher prices for natural gas this year compared to last year electric generators have shifted back to coal as their main fuel thus reducing demand in the electric generation sector.  The hurricane season is still a wild card with forecasts of above average activity; we still have not entered the peak hurricane season, which centers around August and September, so more news to follow in the near future.

July Temps resized 600

 Courtesy EarthSat

 

Natural Gas Production and Pricing

Our national dry natural gas production continues to exceed last year’s levels.  In addition the switch from coal electric generation to natural gas generation has slowed down dramatically, while the higher natural gas pricing compared to last year has allowed several coal plants to recover some of their lost generation from the earlier fuel switches.  If the mild temperatures continue in the heavy electric usage locations such as the Northeast and Midwest, we have the potential for even softer prices.

On Wednesday, June 26th the July 2013 natural gas contract settled at a price of $3.707 per MMBtu, a drop from the June settle and a break from the upward pricing curve of the last three months.  The NYMEX Natural Gas settle curve depicted below includes a polynomial trend line (red line) which shows a sustained upward pricing curve; we are hoping the latest pricing break will allow for a reversal by the end of the summer season.

 Gas Settle   July resized 600

 

Bottom Line   

Currently the 12-month average forward pricing curve for natural gas is at $3.785 per MMBTU, compared to last month’s $4.157 per MMBT.  In addition the five-month pricing curve for the upcoming heating season, November 2013 through March 2014, is at $3.85 per MMBTU.  Last week was the turning point for natural gas pricing with substantial drops; it appears that the market might start to bottom out while several buyers have started to take advantage of the current low pricing in order to cover their positions for the upcoming winter loads.  As stated last month, according to several energy executives polled earlier in May, natural gas pricing is expected to remain in the $3 to $4 per MMBTU range for the rest of the year. 

The fact remains that natural gas and electric prices continue to trade higher than a year ago but they are still close to the lowest levels of the last ten years set back in May of 2012.  The recent development of shale gas production has provided some protection against extreme pricing spikes usually accompanying the hurricane season, but a large region of our country, the Northeast, inclusive of the NYC area and New England, has remained very volatile due to high dependence on natural gas for electric generation.  A coastal storm such as Sandy could create major disruptions and substantial price spikes particularly for these markets.

We continue to believe that the risk of higher pricing for both natural gas and electric supplies greatly outweighs any pricing downturn opportunities.  Clients should consider covering some or all of their electric and natural gas exposure for the upcoming summer loads if they have not done so already. If all goes well with temperatures, natural gas injections and the hurricane season we could see a buying opportunity in the late September/early October timeframe.  At that point clients should consider longer positions in the market compared to shorter 12- or 18-month deals.  In several cases we are seeing better pricing moving out to 24- and even 36-month offerings due to the lower capacity charges.

 

About AUM

In 2012, we experienced unprecedented growth in our business due in large part to a relentless focus on increasing property values for our client property owners.  In 2012 alone, we:

  • Processed 700,000 energy and utility invoices worth $157 million with 99.7% data capture accuracy and 99.9925% on-time payment;
  • Collected over $6 million in vacant charges that would have gone uncharged to residents and paid by Property Owners;
  • Issued 4.5 million billing statements representing $931 million in recovered expenses
  • Increased property values by $125 million through reduction in energy expenses using on-site energy audits;
  • Managed 145 million kWh and 13 million therms through energy procurement in deregulated states.

AUM’s suite of services is designed to be a complete energy and utility management solution. Effective energy management ensures proper energy allocation (Resident Billing Services), energy accounting (Invoice Processing Services), and rate and usage management (Energy Management Services).

For more information on how AUM Clients are using AUM’s complete financial package for Energy and Utility expense management to save up to 25% on their energy expenses, just click on the button below.

  

Tags: Energy cost, Energy consumption, Conservation, Energy budgeting, Energy procurement, Energy rates, Utility rate schedules, Energy Information Administration, Multifamily, Energy market, EnergyBlogs

AUM Energy Outlook - June 2013

Posted by Dimitris Kapsis on Wed, Jun 05, 2013 @ 09:52 AM

Natural Gas Storage and Usage

It was not so long ago that we were mentioning snow in our forecasts but we can safely state now that spring weather has finally taken over and summer temperatures are just around the corner.  On Thursday, May 30th the Energy Information Administration (EIA) reported a natural gas injection into natural gas storage of 88 Bcf, in line with analysts’ expectations and above last year’s injection and the five-year average.  As a result natural gas in storage is currently at 2.141 Tcf, 88 Bcf below the five-year average figure and 664 Bcf below last year’s level.

Gas Injection June

Natural gas storage is still lower than last year’s levels and the five-year average but the variances are consistently shrinking with every week’s storage report.  During May the natural gas storage buildup reached 276 Bcf compared to last year’s same period buildup of only 168 Bcf.  If the storage injections continue at the same pace we should see the natural gas market loosening up.  It is expected that EIA will report the first triple-digit storage injection of the season the week of June 3rd; ahead of the five-year average and last year’s same period injection.

June_storage

 

Temperature Outlook

June temperatures for the Midwest and the Southeast are projected to be within normal ranges.  Both regions experienced large increases in natural-gas electric generation last year. Normal temperatures should help keep pricing down.  Overall as the weather began heating up over the last several weeks, natural gas usage for heating throughout the US decreased substantially but usage in the electric generation sector rose as leading generators continued to use up their existing natural gas stockpiles. Due to higher prices for natural gas it is expected that most of the generators will shift back to coal as their main fuel thus reducing demand in the electric generation sector.  This month we are including the temperature forecasts for June and July with the following disclaimer: “Review with caution, information can change without any notice.”  In addition hurricane experts have called for an above-average active hurricane season.

 June_Temps

Source:  MDA Earth Sat

Natural Gas Production and Pricing

Our national dry natural gas production continues to exceed last year’s levels.  In addition current price spikes for natural gas commodity have reduced the switch of coal electric generation to natural gas generation and possibly have allowed several coal plants to recover some of their lost generation from the earlier fuel switches.  We also had several idle nuclear plants come back on line over the last few weeks further reducing the demand for natural gas. 

On Thursday, May 30th the June 2013 natural gas contract settled at a price of $4.148 per MMBtu, almost identical to the May settle.  The NYMEX Natural Gas settle curve depicted below includes a polynomial trend line (red line) to show that we have entered a sustained upward pricing curve which we are hoping flattens out over the summer months.

June_Gas_Settle

 

Bottom Line

Currently the 12-month average forward pricing curve for natural gas is at $4.157 per MMBTU.  It appears we have finally entered the spring season and the upcoming summer season appears to be approaching with mild temperatures.  According to several energy executives polled earlier in May natural gas pricing is expected to remain in the $3 to $4 per MMBTU range for the rest of the year.  

The fact is that natural gas and electric prices continue to trade higher than a year ago but they are still close to the lowest levels of the last ten years reached in May, 2012.  The recent development of shale gas production has provided some protection against extreme pricing spikes usually accompanying the hurricane season but a large region of our country, the Northeast, inclusive of the NYC area and New England has remained very volatile due to high dependence on natural gas for electric generation.  Coastal storms such as Sandy can create major supply disruptions, causing substantial price spikes, particularly for these markets.

Clients should consider covering some or all of their electric and natural gas exposure for the upcoming summer loads if they have not done so already; if all goes well with temperatures, natural gas injections and the hurricane season we could see a buying opportunity in the late September early October time frame.  At that point clients should consider longer positions in the market compared to shorter 12- or 18-month deals.  In several cases we are seeing better pricing moving out to 24- and even 36-month offerings due to the lower capacity charges.

Tags: Energy cost, Energy consumption, Conservation, Energy budgeting, Energy procurement, Energy rates, Utility rate schedules, Energy Information Administration, Multifamily, Energy market, EnergyBlogs

AUM Energy Market Outlook - May 2013

Posted by Dimitris Kapsis on Mon, May 06, 2013 @ 11:29 AM

Natural Gas Storage and Usage

Weather has continued to be the center of attention for the energy markets. April continued on March’s path with well below- average temperatures with substantial snow in the upper Midwest and the Rockies. On Thursday, April 25th the Energy Information Administration (EIA) reported a natural gas injection into natural gas storage of only 30 Bcf, in line with analysts’ expectations but well below last year’s injection and the 5-year average. As a result natural gas in storage is currently at 1.734 Tcf, 96 Bcf below the 5-year average figure and 807 Bcf below last year’s level.

 

Gas_Injection-May

 

A prolonged winter has caused an unexpected reduction in natural gas storage levels. But weather forecasters are noting that the shoulder season is finally here. Over the next several weeks demand for energy should decrease substantially, and heating loads should slowly be replaced with cooling loads. For only the second time in nine weeks, energy prices fell this past week. We will get a short respite from sharp price increases, but we cannot conclude that this downward price trend will continue. With an onset delay of the storage injection season and two below-average injections since, we have officially crossed below the 5-year average storage trend; a level not experienced since fall of 2011.

May_Storage

 

Temperature Outlook

According to the weather “experts” we have entered the period referred to as shoulder season. The wild card for natural gas prices, and in turn electric prices, is the upcoming summer demand. If the shoulder season extends well into June for the majority of the country with mild temperatures, we could see storage levels re-building above the 5-year average trend, allowing for the perception of a surplus with downward price pressure. If the shoulder season is short with warm summer weather demand knocking on our door early, we could see immediate price response with even higher levels. I am not adding any weather forecast graphs this month because they tended to be a little inaccurate over the last three months. Weather forecast experts have recently switched their prediction for May to “normal temperatures” instead of prior predictions for “above-normal temperatures”.

 

Natural Gas Production and Pricing

There is some good news. Our national dry natural gas production is approximately 1.5% above last year’s levels. In addition, current price spikes for natural gas commodity have reduced the switch of coal electric generation to natural gas generation and possibly have allowed several coal plants to recover some of their lost generation from the earlier fuel switches. We will also see several idle nuclear plants coming back on line for the upcoming summer season, so the demand for natural gas will reduce further. All these factors, with a little help from Mother Nature in terms of normal temperatures, should allow the natural gas storage to replenish and reduce the fears and speculations of a tightening supply forecast.

On Friday, April 26th, the May 2013 natural gas contract settled at a price of $4.152 per MMBtu, the first time it broke the $4.00 psychological resistance since August 2011. In the NYMEX Natural Gas settle curve depicted below we added a polynomial trend line (red line) to show that we have entered a sustained upward pricing curve which we are hoping flattens out by the end of the shoulder season.

May_Gas_Settle


Bottom Line

Natural gas prices have inched upward for the last nine weeks, with the exception of a couple of minor dips. Currently the 12-month pricing curve for natural gas is at $4.324 per MMBTU. There is always hope for recovery, and it appears we have entered the shoulder season with mild spring temperatures, allowing the natural gas market a breather hopefully for the next couple of months.

The fact is that natural gas and electric prices are trading higher than a year ago, but they are still close to the lowest levels of the last ten years set back in May of 2012. The spring thaw might be the right time to secure natural gas and electric pricing contracts for the foreseeable future. Clients should be considering longer positions in the market compared to shorter 12- or 18-month deals. In several cases we are seeing better pricing moving out to 24- and even 36- month offerings due to the lower capacity charges, market dependent.

Tags: Energy cost, Energy consumption, Conservation, Energy budgeting, Energy procurement, Energy rates, Utility rate schedules, Energy Information Administration, Multifamily, Energy market, EnergyBlogs, Risk tolerance