WEEKLY ENERGY MARKET UPDATE:
Friday (10/26) energy settlements:
November NYMEX gas closed: $7.218
Winter ’07-’08: $7.87
The NYMEX one-year strip $7.90, 2-year strip $8.19, 3-year $8.25
(Bid and Ask for these strips vary greatly)
Last 12-month average NYMEX: $6.943, Last Summer: $6.79
Last winter: $7.16
Crude oil: $91.86, #2 oil $2.43
The bearish divergence in the daily MACD and RSI I mentioned last week proved to be good indicators as gas traded lower early in the week, but the move in crude to another new all-time high carried natural gas in sympathy. The November contract expiration on Monday (10/29) could be a carbon copy of last year’s $7.15, and given the similar fundamentals, I can understand why.
Last year, December gas expired at $8.31. That’s the only expiration above the $5.50-$8.00 trading range since the ’05 hurricanes. While I expect continued volatility and December gas could trade above $8 intra-month while still remaining in its present trading channel, I’d be very surprised if we repeat the ’06 expiration price this year.
Working gas in storage, at 3.443 Tcf as of 10/19 is only 18 Bcf short of last year’s all-time record, and with 2 weeks left in the “traditional” injection season, 3.5 Tcf seems a given while long range weather forecasts would indicate additional injections throughout November. This sets up well for lower prices in Q1 gas and I suggest that you limit the urge to buy more gas beyond December or January.
During the 3rd quarter of 2007, US well completions soared to the highest quarterly level in more than two decades. An estimated 13,543 gas and oil wells were drilled, the most since Q3 of 1985. 7,628 gas wells were completed, the highest 3rd quarter on record.
If I were a hedge fund manager with profits in crude oil, the Euro and gold with the year’s end and my bonus within sight, I’d at least be thinking about selling my crude position. Crude and products are well supplied. I know the Turkey-Kurd-Iraq issue is unsettling but that was a big worry when we attacked in 2003. The weak dollar is a protracted problem but that gives traders a backstop for another run up in oil in 2008 since that was the reason given for this rally until the Kurd attacks.
Please feel free to call me to discuss any questions you may have about your specific energy plan.
Sunday, October 28, 2007
Monday, October 22, 2007
10-22-07 Energy Update
WEEKLY ENERGY MARKET UPDATE:
Friday (10/19) energy settlements:
November NYMEX gas closed: $7.041
Winter ’07-’08: $7.79
The NYMEX one-year strip $7.80, 2-year strip $8.07, 3-year $8.13
(Bid and Ask for these strips vary greatly)
Last 12-month average NYMEX: $6.943, Last Summer: $6.33
Last winter: $7.16
Crude oil: $88.60, #2 oil $2.33
Last week, natural gas ignored the ongoing speculative exuberance in crude oil which reached $90 a barrel. Gas settled just slightly higher than the previous week and only a dime above its average monthly settlement price of the last 12 months. From a technical perspective, gas looks like it will trade lower, as its daily continuation chart has a bearish divergence in its Relative Strength Index (RSI) as well as the Moving Average Convergence Divergence (MACD)(Both moved lower as gas moved higher). These have historically been accurate indicators of lower price action. We may well see $100 oil while gas has a “6” in front of it before the end of October.
There is also bearish fundamental data. The extremely warm weather while nuclear power plants have been down for planned maintenance has caused gas fired power generators to consume about 3 Bcfd. Now, moderating temps will relieve that condition, sending more gas to storage. Consequently, we expect the November ‘07 contract expiration to be in line with or lower than last November’s price of $7.15. If you choose to buy forward, buy on support in the $6.50 to $6.75 range or buy monthly settlements.
Weather Frontier issued its winter ’07-’08 Outlook last week and predicts a “La Nina” dominated, warmer than normal winter with only the month of February being colder than normal and even that is limited to the Great Lakes region. The Farmer’s Almanac calls for warmer than normal too with early December being the only time we see below average temps.
Looking ahead, Qatar expects to more than double its exports of LNG to 77 million tons per year by 2011, equaling roughly 20% of the global supply and yet its super giant North Field should have 97 years of reserves left at that production rate. But, the message to the world is that Qatar has no intentions to expand its LNG sales beyond its 2011 output. If the growth does not come from Qatar, where else will it come from? Russia, Iran, west Africa and Australia are likely candidates but, each has its own set of challenges that would add to the cost of LNG.
Conservation is vital in a world that consumes more energy as it grows. Last week, the California Public Utilities Commission approved a framework to guide the long-term energy efficiency programs for its gas and electric utilities. The plan will require that all new homes produce energy equal to or greater than what they consume by 2020. Commercial structures have until 2030.
Please feel free to call me to discuss any questions you may have about your specific energy plan.
Friday (10/19) energy settlements:
November NYMEX gas closed: $7.041
Winter ’07-’08: $7.79
The NYMEX one-year strip $7.80, 2-year strip $8.07, 3-year $8.13
(Bid and Ask for these strips vary greatly)
Last 12-month average NYMEX: $6.943, Last Summer: $6.33
Last winter: $7.16
Crude oil: $88.60, #2 oil $2.33
Last week, natural gas ignored the ongoing speculative exuberance in crude oil which reached $90 a barrel. Gas settled just slightly higher than the previous week and only a dime above its average monthly settlement price of the last 12 months. From a technical perspective, gas looks like it will trade lower, as its daily continuation chart has a bearish divergence in its Relative Strength Index (RSI) as well as the Moving Average Convergence Divergence (MACD)(Both moved lower as gas moved higher). These have historically been accurate indicators of lower price action. We may well see $100 oil while gas has a “6” in front of it before the end of October.
There is also bearish fundamental data. The extremely warm weather while nuclear power plants have been down for planned maintenance has caused gas fired power generators to consume about 3 Bcfd. Now, moderating temps will relieve that condition, sending more gas to storage. Consequently, we expect the November ‘07 contract expiration to be in line with or lower than last November’s price of $7.15. If you choose to buy forward, buy on support in the $6.50 to $6.75 range or buy monthly settlements.
Weather Frontier issued its winter ’07-’08 Outlook last week and predicts a “La Nina” dominated, warmer than normal winter with only the month of February being colder than normal and even that is limited to the Great Lakes region. The Farmer’s Almanac calls for warmer than normal too with early December being the only time we see below average temps.
Looking ahead, Qatar expects to more than double its exports of LNG to 77 million tons per year by 2011, equaling roughly 20% of the global supply and yet its super giant North Field should have 97 years of reserves left at that production rate. But, the message to the world is that Qatar has no intentions to expand its LNG sales beyond its 2011 output. If the growth does not come from Qatar, where else will it come from? Russia, Iran, west Africa and Australia are likely candidates but, each has its own set of challenges that would add to the cost of LNG.
Conservation is vital in a world that consumes more energy as it grows. Last week, the California Public Utilities Commission approved a framework to guide the long-term energy efficiency programs for its gas and electric utilities. The plan will require that all new homes produce energy equal to or greater than what they consume by 2020. Commercial structures have until 2030.
Please feel free to call me to discuss any questions you may have about your specific energy plan.
WEEKLY ENERGY MARKET UPDATE:
Friday (10/19) energy settlements:
November NYMEX gas closed: $7.041
Winter ’07-’08: $7.79
The NYMEX one-year strip $7.80, 2-year strip $8.07, 3-year $8.13
(Bid and Ask for these strips vary greatly)
Last 12-month average NYMEX: $6.943, Last Summer: $6.33
Last winter: $7.16
Crude oil: $88.60, #2 oil $2.33
Last week, natural gas ignored the ongoing speculative exuberance in crude oil which reached $90 a barrel. Gas settled just slightly higher than the previous week and only a dime above its average monthly settlement price of the last 12 months. From a technical perspective, gas looks like it will trade lower, as its daily continuation chart has a bearish divergence in its Relative Strength Index (RSI) as well as the Moving Average Convergence Divergence (MACD)(Both moved lower as gas moved higher). These have historically been accurate indicators of lower price action. We may well see $100 oil while gas has a “6” in front of it before the end of October.
There is also bearish fundamental data. The extremely warm weather while nuclear power plants have been down for planned maintenance has caused gas fired power generators to consume about 3 Bcfd. Now, moderating temps will relieve that condition, sending more gas to storage. Consequently, we expect the November ‘07 contract expiration to be in line with or lower than last November’s price of $7.15. If you choose to buy forward, buy on support in the $6.50 to $6.75 range or buy monthly settlements.
Weather Frontier issued its winter ’07-’08 Outlook last week and predicts a “La Nina” dominated, warmer than normal winter with only the month of February being colder than normal and even that is limited to the Great Lakes region. The Farmer’s Almanac calls for warmer than normal too with early December being the only time we see below average temps.
Looking ahead, Qatar expects to more than double its exports of LNG to 77 million tons per year by 2011, equaling roughly 20% of the global supply and yet its super giant North Field should have 97 years of reserves left at that production rate. But, the message to the world is that Qatar has no intentions to expand its LNG sales beyond its 2011 output. If the growth does not come from Qatar, where else will it come from? Russia, Iran, west Africa and Australia are likely candidates but, each has its own set of challenges that would add to the cost of LNG.
Conservation is vital in a world that consumes more energy as it grows. Last week, the California Public Utilities Commission approved a framework to guide the long-term energy efficiency programs for its gas and electric utilities. The plan will require that all new homes produce energy equal to or greater than what they consume by 2020. Commercial structures have until 2030.
Please feel free to call me to discuss any questions you may have about your specific energy plan.
Friday (10/19) energy settlements:
November NYMEX gas closed: $7.041
Winter ’07-’08: $7.79
The NYMEX one-year strip $7.80, 2-year strip $8.07, 3-year $8.13
(Bid and Ask for these strips vary greatly)
Last 12-month average NYMEX: $6.943, Last Summer: $6.33
Last winter: $7.16
Crude oil: $88.60, #2 oil $2.33
Last week, natural gas ignored the ongoing speculative exuberance in crude oil which reached $90 a barrel. Gas settled just slightly higher than the previous week and only a dime above its average monthly settlement price of the last 12 months. From a technical perspective, gas looks like it will trade lower, as its daily continuation chart has a bearish divergence in its Relative Strength Index (RSI) as well as the Moving Average Convergence Divergence (MACD)(Both moved lower as gas moved higher). These have historically been accurate indicators of lower price action. We may well see $100 oil while gas has a “6” in front of it before the end of October.
There is also bearish fundamental data. The extremely warm weather while nuclear power plants have been down for planned maintenance has caused gas fired power generators to consume about 3 Bcfd. Now, moderating temps will relieve that condition, sending more gas to storage. Consequently, we expect the November ‘07 contract expiration to be in line with or lower than last November’s price of $7.15. If you choose to buy forward, buy on support in the $6.50 to $6.75 range or buy monthly settlements.
Weather Frontier issued its winter ’07-’08 Outlook last week and predicts a “La Nina” dominated, warmer than normal winter with only the month of February being colder than normal and even that is limited to the Great Lakes region. The Farmer’s Almanac calls for warmer than normal too with early December being the only time we see below average temps.
Looking ahead, Qatar expects to more than double its exports of LNG to 77 million tons per year by 2011, equaling roughly 20% of the global supply and yet its super giant North Field should have 97 years of reserves left at that production rate. But, the message to the world is that Qatar has no intentions to expand its LNG sales beyond its 2011 output. If the growth does not come from Qatar, where else will it come from? Russia, Iran, west Africa and Australia are likely candidates but, each has its own set of challenges that would add to the cost of LNG.
Conservation is vital in a world that consumes more energy as it grows. Last week, the California Public Utilities Commission approved a framework to guide the long-term energy efficiency programs for its gas and electric utilities. The plan will require that all new homes produce energy equal to or greater than what they consume by 2020. Commercial structures have until 2030.
Please feel free to call me to discuss any questions you may have about your specific energy plan.
Monday, October 8, 2007
10-8-07 Energy Update
WEEKLY ENERGY MARKET UPDATE:
Friday (10/5) energy settlements:
November NYMEX gas closed: $7.073
Winter ’07-’08: $7.89
The NYMEX one-year strip $7.86, 2-year strip $8.08, 3-year $8.10
(Bid and Ask for these strips vary greatly)
Last 12-month average NYMEX: $6.943, Last Summer: $6.33
Last winter: $7.16
Crude oil: $81.22, #2 oil $2.223
Continued warm temps 15 degrees above the norm in the eastern US combined with scheduled maintenance for 16 nuclear power plants increased natural gas usage for power generation and reduced gas storage injections. To give that perspective, 4.1 Bcf of gas was required to replace 16,336 Mw of nuclear power on Friday out of a total of 25.5 Bcf used for power generation. Total US production on Friday was estimated at 51.7 Bcf while total US gas receipts including imports was 61 Bcf. Injections for the week ending 9/28 were 57 Bcf, with a comfortable total of 3.263 Tcf in storage.
Gas production in the Rockies is down, but producers shouldn’t be castigated for taking gas off the market to support prices. The reality of gas production is that mechanical problems occur to wells regularly. When gas prices are high, producers rush to get them back on line. When prices are less than desired, producers wait until there are enough wells down to spread out the large set up costs for a rework rig. With Colorado prices south of $3 most days, there is no rush to “overpay” to get sickly wells back on line.
LNG deliveries are also down as Asian purchasers take advantage of a cheap dollar to outbid US sites for cargos. Since we can’t meet demand without LNG, the devalued greenback may be a harbinger of higher Q4 gas prices as cold weather finally arrives.
The gap in the daily continuation chart between $6.74 and $6.47 is a good place to be a buyer of Nov gas. Otherwise, nat gas remains range bound between $5.50 and $8.00, so think twice before you lock in prices near the top of that range. It has proven to be costly insurance over the past 85 weeks.
On an upbeat note, production from the Independence Hub in 8,000 feet of water in the Gulf has reached 0.44 Bcf/d, and it is expected to reach 1 Bcf/d by year’s end.
South Korea’s Daewoo Shipbuilding and Marine Engineering Co. Ltd. have started construction of Transocean's Discoverer Americas drillship, the second of Transocean's four enhanced Enterprise-class drillships. Contracted to Hydro of Norway for operations in the US Gulf of Mexico, the ultra deepwater drillship is designed to operate in water depths to 12,000 ft and to drill wells to a depth of 40,000 ft. Meanwhile, GlobalSantaFe Corp. has $740 million in orders for ultra deepwater drillships for delivery in late 2010. They will be able to drill in 12,000 ft of water.
Please feel free to call me to discuss any questions you may have about your specific energy plan.
Friday (10/5) energy settlements:
November NYMEX gas closed: $7.073
Winter ’07-’08: $7.89
The NYMEX one-year strip $7.86, 2-year strip $8.08, 3-year $8.10
(Bid and Ask for these strips vary greatly)
Last 12-month average NYMEX: $6.943, Last Summer: $6.33
Last winter: $7.16
Crude oil: $81.22, #2 oil $2.223
Continued warm temps 15 degrees above the norm in the eastern US combined with scheduled maintenance for 16 nuclear power plants increased natural gas usage for power generation and reduced gas storage injections. To give that perspective, 4.1 Bcf of gas was required to replace 16,336 Mw of nuclear power on Friday out of a total of 25.5 Bcf used for power generation. Total US production on Friday was estimated at 51.7 Bcf while total US gas receipts including imports was 61 Bcf. Injections for the week ending 9/28 were 57 Bcf, with a comfortable total of 3.263 Tcf in storage.
Gas production in the Rockies is down, but producers shouldn’t be castigated for taking gas off the market to support prices. The reality of gas production is that mechanical problems occur to wells regularly. When gas prices are high, producers rush to get them back on line. When prices are less than desired, producers wait until there are enough wells down to spread out the large set up costs for a rework rig. With Colorado prices south of $3 most days, there is no rush to “overpay” to get sickly wells back on line.
LNG deliveries are also down as Asian purchasers take advantage of a cheap dollar to outbid US sites for cargos. Since we can’t meet demand without LNG, the devalued greenback may be a harbinger of higher Q4 gas prices as cold weather finally arrives.
The gap in the daily continuation chart between $6.74 and $6.47 is a good place to be a buyer of Nov gas. Otherwise, nat gas remains range bound between $5.50 and $8.00, so think twice before you lock in prices near the top of that range. It has proven to be costly insurance over the past 85 weeks.
On an upbeat note, production from the Independence Hub in 8,000 feet of water in the Gulf has reached 0.44 Bcf/d, and it is expected to reach 1 Bcf/d by year’s end.
South Korea’s Daewoo Shipbuilding and Marine Engineering Co. Ltd. have started construction of Transocean's Discoverer Americas drillship, the second of Transocean's four enhanced Enterprise-class drillships. Contracted to Hydro of Norway for operations in the US Gulf of Mexico, the ultra deepwater drillship is designed to operate in water depths to 12,000 ft and to drill wells to a depth of 40,000 ft. Meanwhile, GlobalSantaFe Corp. has $740 million in orders for ultra deepwater drillships for delivery in late 2010. They will be able to drill in 12,000 ft of water.
Please feel free to call me to discuss any questions you may have about your specific energy plan.
Monday, October 1, 2007
10-1-07 Energy Update
WEEKLY ENERGY MARKET UPDATE
Friday (9/28) energy settlements:
November NYMEX gas closed: $6.87
Winter ’07-’08: $7.76
The NYMEX one-year strip $7.75, 2-year strip $8.00, 3-year $8.05
(Bid and Ask for these strips vary greatly)
Last 12-month average NYMEX: $6.943, Last Summer: $6.33
Last winter: $7.16
September Crude oil: $81.66, #2 oil $2.225
October gas expired at $6.423, almost a dollar higher than Sept. The increase appeared more driven by financial traders than supply-demand fundamentals as “short Oct./long Nov” spreads had traders scurrying to purchase October contracts on expiration.
Last week’s storage report put us at 3.206 Tcf. During the 6 weeks remaining in the traditional injection season we only need to average 65 Bcf per week to reach the previously unthinkable total of 3.6 Tcf in the ground ahead of winter. Long range forecasts project a mild November nationwide which will lengthen the injection season. Everything about the fundamentals would make one think that gas should be $5.00. And, when I put on my technical analyst’s hat, the November chart doesn’t look bullish. But, at this time of year, the market acts counter intuitively. When storage gets full, gas prices go up. Natural gas rallies every October. November gas has expired higher than October every year in this decade. In 10 of the past 16 years, the Q4 high has been in October or November, so you can’t bet against tradition.
Throughout the history of the NYMEX, the average increase from the lowest intraday Q3 price to the highest intraday Q4 price has been 111%. With high storage levels and greater domestic production than a year ago, most pundits logically predict less volatility this winter. The private weather forecaster, WSI Corporation predicts the next two months will be warmer than normal across most of the US, but December will bring below-normal temperatures to the heavily populated Northeast and North Central regions (based on La Nina trends). Maybe that will be the catalyst for the rally, but I agree with the majority this time because colder temps confined regionally won’t be enough to offset ample gas supplies, especially if the nuclear power fleet remains at nearly full capacity.
November gas should decline to at least the October expiration price so set trigger to buy additional supplies when Nov. trades from $6.43 to $6.25. Keep some powder dry to purchase longer term strips during the Q1 low.
In the news: The Chinese have a deal with Cuba to explore oil reserves almost within sight of Key West, Florida, while Venezuela, which controls the largest oil reserves in the Western Hemisphere is making deals with China to sell them oil that is currently coming to the US. The Chinese plan to slant drill off the Cuban coast near the Florida Straits, which would tap into U.S. oil reserves that are estimated at 4 to 9 billion barrels. Of course, we won’t drill them because of Florida’s anti-drilling lobby. For comparison, 4 to 10 billion barrels are believed to be beneath the Alaska National Wildlife Refuge, where the future of drilling is also held up in Congress.
Please feel free to call me to discuss any questions you may have about your specific energy plan.
Friday (9/28) energy settlements:
November NYMEX gas closed: $6.87
Winter ’07-’08: $7.76
The NYMEX one-year strip $7.75, 2-year strip $8.00, 3-year $8.05
(Bid and Ask for these strips vary greatly)
Last 12-month average NYMEX: $6.943, Last Summer: $6.33
Last winter: $7.16
September Crude oil: $81.66, #2 oil $2.225
October gas expired at $6.423, almost a dollar higher than Sept. The increase appeared more driven by financial traders than supply-demand fundamentals as “short Oct./long Nov” spreads had traders scurrying to purchase October contracts on expiration.
Last week’s storage report put us at 3.206 Tcf. During the 6 weeks remaining in the traditional injection season we only need to average 65 Bcf per week to reach the previously unthinkable total of 3.6 Tcf in the ground ahead of winter. Long range forecasts project a mild November nationwide which will lengthen the injection season. Everything about the fundamentals would make one think that gas should be $5.00. And, when I put on my technical analyst’s hat, the November chart doesn’t look bullish. But, at this time of year, the market acts counter intuitively. When storage gets full, gas prices go up. Natural gas rallies every October. November gas has expired higher than October every year in this decade. In 10 of the past 16 years, the Q4 high has been in October or November, so you can’t bet against tradition.
Throughout the history of the NYMEX, the average increase from the lowest intraday Q3 price to the highest intraday Q4 price has been 111%. With high storage levels and greater domestic production than a year ago, most pundits logically predict less volatility this winter. The private weather forecaster, WSI Corporation predicts the next two months will be warmer than normal across most of the US, but December will bring below-normal temperatures to the heavily populated Northeast and North Central regions (based on La Nina trends). Maybe that will be the catalyst for the rally, but I agree with the majority this time because colder temps confined regionally won’t be enough to offset ample gas supplies, especially if the nuclear power fleet remains at nearly full capacity.
November gas should decline to at least the October expiration price so set trigger to buy additional supplies when Nov. trades from $6.43 to $6.25. Keep some powder dry to purchase longer term strips during the Q1 low.
In the news: The Chinese have a deal with Cuba to explore oil reserves almost within sight of Key West, Florida, while Venezuela, which controls the largest oil reserves in the Western Hemisphere is making deals with China to sell them oil that is currently coming to the US. The Chinese plan to slant drill off the Cuban coast near the Florida Straits, which would tap into U.S. oil reserves that are estimated at 4 to 9 billion barrels. Of course, we won’t drill them because of Florida’s anti-drilling lobby. For comparison, 4 to 10 billion barrels are believed to be beneath the Alaska National Wildlife Refuge, where the future of drilling is also held up in Congress.
Please feel free to call me to discuss any questions you may have about your specific energy plan.
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