Energy Market Update August 21, 2014 Chris Dubay Energy Advisor
NYMEX is Range-bound Again Reached 5-year highs in Feb Prices had been range-bound since late Feb ($4.30 - $4.80) Broke out below range on July 7 New range: $3.75 - $4.00 Back to a sideways trend with a $3.75 floor
Forward Markets Back in Contango NYMEX NG prices since late 2013 Cal 17 Cal 16 Cal 15 12-mo Strip Cal 15 reached all-time low on July 28 3
70 65 60 55 Gas Production Continues to Break Records... New all-time record: 69.3 Bcf/d on July 30 th U.S. Dry Natural Gas Production (Bcf/day) 50 45 40 35 1/1/2005 1/1/2006 1/1/2007 1/1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 However, Canadian imports are down and exports to Mexico are at all-time high!
Market Stays Focused on Weekly Storage Reports 3,800 3,300 2,800 Source: E.I.A. Estimated U.S. Storage Capacity = 4,239 Bcf Current inventory through 8/8/14 = 2,467 Bcf 17.7% below one year ago 18.9% below 5 year average All time record of 3,929 Bcf on 11/2/12 BCF 2,300 1,800 1,300 Projected inventory through 8/29/14 = 2,712 Bcf 468 Bcf below 2013 492 Bcf below 5YA Working Gas Stock This Year (2014) Working Gas Stock Last Year (2013) 800 5-Year Average (2009-2013) 5
End-of-Season Storage Projection Last week, EIA reported 17 th straight injection > five-year average (5YA) Current weather forecasts support ongoing large injections EIA projects end-of-season (Oct. 31) levels = 3,463 Bcf o 5YA = 3,851 Bcf o 83 Bcf average weekly injection needed to meet EIA s projection 5YA weekly injection = 68 Bcf o To reach 3,500 Bcf, injections must exceed 5YA by 18 Bcf/week o To reach 3,600 Bcf, injections must exceed 5YA by 26 Bcf/week Bentek Energy s forecast for next three weeks: 87, 82, 76 Bcf 6
Algonquin City Gate Future Summer Price Trends $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 $0.10 $0.20 $0.30 $0.40 7 Summer 15 Summer 16 Summer 17 Future summers continue downward trend, in contango Summer 15 basis at -$0.31 Summer 16 basis at -$0.29 Summer 17 basis at -$0.10
Algonquin City Gate Future Winter Price Trends $11.00 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 8 Winter 14/15 Winter 15/16 Winter 16/17 Future winters on the rise again, backwardated Winter 14-15 basis at +$10.12 Winter 15-16 basis at +$8.73 Winter 16-17 basis at +$6.76
ISO-NE Mass Hub Around-the-Clock Pricing Transaction Point: NEPOOL MASS HUB ATC Data Range From: 2/9/2008 2/9/2008 2/9/2008 2/9/2008 1/7/2010 1/11/2011 2/9/2012 11/15/2012 To: FALSE 8/19/2014 8/19/2014 8/19/2014 8/19/2014 8/19/2014 8/19/2014 8/19/2014 8/19/2014 Q4 14 Q1 15 Q2 15 Q3 15 2015 2016 2017 2018 Current Price $66.60 $120.01 $39.37 $39.24 $64.73 $58.20 $55.21 $54.42 Current Percentile 71.9% 96.6% 42.0% 1.7% 90.7% 79.7% 93.0% 90.0% Minimum Price $39.48 $47.99 $35.04 $37.68 $41.00 $42.04 $44.08 $41.26 Date of Minimum 4/21/12 1/21/12 8/29/12 7/24/14 8/29/12 8/29/12 8/29/12 1/3/13 Maximum Price $92.54 $131.17 $62.81 $67.20 $72.82 $64.77 $59.87 $58.41 Date of Maximum 7/1/08 5/30/14 5/14/10 1/10/10 5/30/14 5/30/14 5/30/14 6/7/14 9 Next winter near all-time high o On-peak $137 o Off-peak $104 2015-2018 prices steeply backwardated 2017-2018 continue to be historically high
New England Pipeline Status Background Gas shortfall only occurs during long cold snaps when majority of pipeline capacity is used by LDCs to provide gas for business and residential space heating New pipeline capacity not easily built w/o firm, long-term commitments No incentives for NE generators to make commitments for occasional use Even more NE generation will be gas-fired for winter 14-15 o 605 MW Vermont Yankee retirement o New 400 MW gas-fired Pionerr Valley in Westfield, MA o Several coal units retiring 10
New England Pipeline Status Currently Planned Projects Salem Harbor mid to late 2016 o 115 MMcf/d to Footprint Power s new 674 MW plant o Only pipeline project tied directly to generator Algonquin Incremental Market (AIM) Nov 2016 o 342 MMcf/d additional capacity through CT, RI, and MA Connecticut Expansion Nov 2016 o 72 MMcf/d additional capacity into southwest MA and northern CT 11 Atlantic Bridge late 2017 o 100-600 MMcf/d capacity along AGT and MNP o Capacity going to LDCs, not generators
New England Pipeline Status Other Projects or Ideas Intermittent Gas for Electric Reliability (IGER) o New England States Committee on Electricity (NESCOE) o Want to socialize cost of new capacity for generators o 600 MMcf/d additional capacity later this decade o Monthly charge on customer bills Spectra Energy s AGT-based solution o Add 900 MMcf/d of gas transmission capacity to supply 9 units o As early as 2018 12 Northeast Energy Direct Project o Expansion of Kinder Morgan s Northeast Expansion Project o Adds 2.2 Bcf/d of capacity to TGP s 300 line
13 New England Pipeline Status Even More Ideas Continent-to-Coast (C2C) o PNGT wants to be first to test IGER o Add up to 182 MMcf/d of pipeline capacity o Could be as early as Nov 2016 IGER won t be ready by then GDF Suez Gas NA Proposal o Owns Distrigas LNG terminal in Everett, MA o Regasification facility can provide 435 MMcf/d o Lower cost than building new pipeline capacity o Already operating, ready for expansion Canadian Hydropower o Build transmission line to deliver eastern Canadian hydropower
Weather Outlook 14 El Nino pattern above-normal in West, below-normal in East Overall, mild end-of-summer forecast, especially for Midwest
Preliminary Winter Forecast Joe Bastardi WetherBELL Analytics 15 Projected Snowfall
WeatherBELL Analytics Forecast Joe Bastardi o Reputation as being very reliable o Formerly worked for AccuWeather Compared to 2002-2003 and 2009-2010 winter models Cold, snowy winter following El Nino summer, especially in southern and eastern U.S. Joe says: o This winter will be worse than last winter in places like Washington D.C., Nashville, southeastern U.S. o This winter will not be as bad as last winter in places like Chicago and Minneapolis 16 http://live.wsj.com/video/this-year-winter-shaping-up-to-be-colder-snowier/857da4c5- FF31-46EE-A859-CCD7CFEDBE4E.html?mod=trending_now_video_2#!967EBE10-472C-4BAD-92F0-A1B11B4D7433
17 Questions?
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