Latest News Updates 2/17/15

 BEAR DRIVERS – Factors driving prices lower

·         EIA gas drilling productivity report

·         Natural gas speculation- Funds' position

o   Position for Non-Commercial futures & swaps was short 81,835 contracts on Feb 10, an increase of 25.4% from Jan. 27. This is the largest short position since Mar. 2012

·         Energy storage

o   Advanced Rail Energy Storage is a new technology to provide grid-scale energy storage by replicating pumped-storage hydro with rail cars going up and down a hill.

·         ERCOT transmission development

o   ERCOT announced $950 million in transmission improvements for the west load zone's growing Permian Basin load by 2020.

o     West zone's peak load has increased over 40% since 2010.

·         LNG export capital

o   Lower oil and natural gas prices are putting completion of LNG export projects at risk, reducing future demand of natural gas by up to 5 Bcf/d.

 Bearish economic indicators

oBaltic Dry Index: 530 on February 13, 2015, the lowest level since 1986.

BULL DRIVERS – Factors driving prices higher

·         Short term weather

o   the 1-15 day is forcasting below normal temps for the eastern half of the U.S.

·         Nuclear Energy decline 

oFitch Ratings is forcasting 8,000 MW of nuclear generation to retire before the expiration of their operating licenses.

     Coal stockpile inventory

oNov. U.S. electric power sector coal stocks estimated at 41,742 thousand short tons, a 9.0% decrease Y/Y.  U.S. coal production for Jan. is estimated at 85.8 million short tons, up 3.4% Y/Y.

     MISO offer price cap waiver

o FERC approved MISO's request to temporarily waive their $1,000/MWh offer price cap this winter to allow generators to recover verifiable costs due to extreme fuel costs.

Bullish economic indicators 

o   U.S. freight carloads up 4.7% Y/Y for week ended Feb. 7

o   Dow Jones Index at 18,019.35 on Feb. 13, up 12.4% Y/Y

o   GDP Projection: 2014=2.4%; 2015= 3.2%; 2016= 2.5%

o     Jan unemployment rate increased 0.1% to 5.7%

o     Jan total nonfarm payrolls increased by 257,000

o     Jan Manufacturing ISM reported PMI at 53.5%

·         Natural gas storage level

o   Current storage level at 2,268 Bcf

o   Y/Y surplus of 542 Bcf; deficit to 5-yr. avg. of 11 Bcf

o     March 31, 2015 estimate of 1,600 Bcf 

·        

MARKET OBSERVATIONS

• Hedging: Understand your risk tolerance and hedge accordingly
• • NYMEX natural gas Mar-Dec 2015 trend indicates that $2.75 - $3.05 is the current “hedge something” range
  • Indiana Hub electric wholesale Feb-Dec 2015 trend indicates that $32.00 – $34.50 is the current “hedge something” range