Bulls and Bears September 2015

Great Lakes Energy Services

Follow Us On:

2510 Old Lyme Court, Medina, OH 44256 | Main Office: 330-662-4057 | Main Fax: 330-662-4057

Click Here to Email US!

Simply The Best

Electric and
Natural Gas Supply

Home Electric Natural Gas News About Us

Latest News Updates 2/17/15

BEAR DRIVERS – Factors driving prices lower

· EIA gas drilling productivity report

January shale/tight gas drilling production reported at 44.8 Bcf/d; 17.9% increase Y/Y and 1.3% increase M/M
Feb shale gas drilling forcasted at 45.4 Bcf/d; 18.0% increase Y/Y and 1.3% increase M/M

· 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

< Bulls and Bears August 2015

Bull/Bear Summary October 2015 >

Bulls and Bears September 2015

September 1st, 2015 at 5:40 pm

BEAR DRIVERS. FACTORS DRIVING PRICES LOWER.

 EIA gas drilling productivity report

 Solar generation

 Pennsylvania power generation

 Distributed energy

 Natural gas storage level

 Bearish economic indicators

BULL DRIVERS. FACTORS DRIVING PRICES HIGHER.

 Environmental policy

 PJM Capacity Performance Plan

 Natural gas consumption

 Natural gas rig count

 Short term weather

 Bullish economic indicators

MARKET OBSERVATIONS

Hedging: Understand your risk level and hedge accordingly.

NYMEX natural gas Sept-Dec 2015 trend indicates that $2.60 - $2.90 is the current "hedge something" range

Indiana Hub electric wholesale Sept-Dec 2015 trend indicates that $30.25 - $32.25 is the current "hedge something" range

BEAR DRIVERS

Factors driving prices lower

EIA gas drilling productivity report

July shale gas drilling actual at 45.4 Bcf/d; 11.0% increase Y/Y and 0.2% decrease M/M.

Aug. shale gas drilling forecasted at 45.2 Bcf/d; 8.4% increase Y/Y and 0.2% decrease M/M.

Solar generation

ERCOT expects between 10,000 MW and 12,500 MW of solar generating capacity to be installed in Texas by 2029.

Pennsylvania power generation

Competitive Power Ventures plans to build a 980MW gas-fired combined-cycle power plant in southwest Pennsylvania to take advantage of the proximity to Marcellus Shale production. Commercial operation is expected by the second quarter of 2019.



Distributed energy

The Department of Energy's Loan Programs Office is making up to $1 billion dollars in new loan guarantees to support distributed energy projects.

Natural gas storage level

Current storage level at 3,099 Bcf

Y/Y surplus of 480 Bcf; surplus to 5-yr. avg. of 88 Bcf

Oct 31, 2015 estimate of 3,800 Bcf

Bearish economic indicators

U.S. freight carloads down 3.7% Y/Y for week ending Aug. 22, 2015

Dow Jones Index at 16,643.01 on Aug. 28, down 2.6% Y/Y

Baltic Dry Index: 903 on Aug. 28, a 21.5% decrease Y/Y

BULL DRIVERS

Factors driving prices higher

Environmental policy

The U.S. EPA is proposing rules on oil and natural gas drilling companies to cut methane emissions by 45% from 2012 levels over the next 10 years. The rules are aimed at preventing methane from inadvertently leaking into the air. Final rulings are expected in 2016.

PJM Capacity Performance Plan

Capacity costs for the 2018-2019 planning year rose 37% to $164.77/MWday. The PJM grid operator can impose penalties up to $2,800/MWh on generators that do not operate during emergency hours.



Natural gas consumption

EIA forecasts industrial natural gas consumption to increase 3.9% in 2016, to average 22.5 Bcf/d due to new industrial plants coming online.

Natural gas rig count

U.S. natural gas rig count at 202 on Aug. 28, a 40.2% decrease Y/Y

Short term weather

The 1-10 day forecast is above normal for the eastern half of the U.S. The 11-15 day is above normal for the east coast.



Bullish economic indicators

July unemployment rate 5.3%, unchanged from June

July total nonfarm payrolls increased 215,000 from June