Latest News Updates

 BEAR DRIVERS – Factors driving prices lower

·         EIA gas drilling productivity report

o   January shale/tight gas drilling production reported at 36.7 Bcf/d; 12.3% increase Y/Y

·         Bearish economic indicators

o   Baltic Dry Index: 1,258 on February 28, 2014

o   WTI currently trading around $103/barrel

o   January U.S. Unemployment rate is 6.6%.  Jobs increased by 113,000, a M/M gain but still less than expected

·         Pipeline infrastructure

o   The Atlantic Sunrise project is expected to transport 1.7 Bcf/d and connect production in NE Marcellus to existing pipelines.  The projected in-service date is mid-2017

·         Domestic exploration

o   US Department of Interior is taking steps that could lead to future oil and gas exploration on the east coast from Delaware to Central Florida

·         Electric demand

o   ERCOT is predicting slower growth in Texas electric demand than once thought after showing much higher reserve margins than previously forecasted.  This is largely attributed to improved technology and efficiency of appliances and electronic gadgets.

·         Renewable energy

o   A recently released report examining the application of solar-plus-battery or “utility in a box” technology concluded that as early as 2020, tens of millions of commercial and residential customers could become entirely independent of the electric grid. 

BULL DRIVERS – Factors driving prices higher

·         Long term weather

o   Below to much-below normal temperatures persist throughout the central and eastern half of the country in the 6-10 day forecast and continue into the 11-15 day forecast.

·         Natural gas storage level

o   Current storage level 1.3 Tcf

o   Y/Y deficit of 905 Bcf: deficit to 5-year average of 711 Bcf

o   March 31, 2014 estimate of 0.9 Tcf

·         Bullish economic indicators

o   February PMI at 53.2%, up 1.9 % M/M

o   GDP Projection: 2014 = 2.8%; 2015 = 2.7%

o   Dow Jones Index at 16,321.71 on February 28, 2014, up 16.1% Y/Y

o   U.S. freight carloads up 1.3% Y/Y for week ending February 22, 2014

·         Natural gas speculation – Funds’ position

o   182,597 long futures & swaps as of February 25, 2014

o   44,247 short futures as of February 25, 2014

·         Electric demand

o   Y/Y monthly demand (reduction)/increase: 3.7% NiHub, 4.3% ERCOT, 1.5% PJM East/West, 1.1% MISO

MARKET OBSERVATIONS

• Hedging: Understand your risk tolerance and hedge accordingly
• • NYMEX natural gas April 2014 – December 2014 trend indicates that $4.25 - $4.70 is the current “hedge something” range
  • Indiana Hub electric wholesale March 2014 – December 2014 trend indicates that $37.75 – 39.75 is the current “hedge something” range