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Weekly Energy Market Update April 8, 2013

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Weekly Energy Market Update video for April 8, 2013. 

The following is a summary of last week’s market activity and the market outlook:

  • Natural gas futures had a strong rally on Friday, after trending downward earlier in the week. Friday’s 18-cent gain erased the 8-cent losses from Monday-Thursday. May futures finished the week at $4.12 — a high for the Prompt Month since August 2011.

  • Market participants were scratching their heads for reasons for the rally, which could have been brought on by:
      • a bullish gas forecast by Goldman Sachs
      • a sudden shutdown of  Georgia Power’s Bowen Coal Plant (3,500 MW capacity) due to an explosion at one of its four units
      • flow limitations at Henry Hub due to water issues
      • concerns about the changing supply-demand balance indicative in recent storage inventory data.
  • The EIA reported a withdrawal of 94 Bcf for the week ending March 29. This was near expectations but much larger than last year. The current inventory through March 29 is 1,687 Bcf, which is a deficit of 779 Bcf or 31%versus last year. Inventories are now 37 Bcf or 2.1% below the 5-year average -the first such deficit since the fall of 2011 and clearly a bullish factor.
  • Although rig count data has been less of a focus recently since it may not necessarily predict all production trends, we have seen significant declines over the last two weeks, after a period of sustained stabilized rig counts since October 2012. Total gas rigs have fallen by 56 rigs over the last three weeks to new long-term lows and horizontal rigs are down 46 over the last three weeks. Production trends are not showing any immediate impact, but still remain down slightly since the peak in November 2012.
  • On the bearish side, nuclear maintenance is now below normal, as plants are coming back online, cold weather in the East has finally broken, and near-term forecasts are calling for mild shoulder month temperatures that will suppress demand.

Posted: April 09, 2013