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Weekly Energy Market Update November 25, 2013

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Weekly Energy Market Update video for November 25, 2013.

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

Natural gas prices continued to rally on Friday as the December 2013 contract pushed to a 5-week high. The Prompt Month finished the day up 6.6 cents to settle the week at $3.768/MMBtu. In total, natural gas gained 11 cents or 3% last week, mostly due to forecasts for below-normal temperatures across a large portion of the country. There are expectations that this Thursday’s holiday will be the coldest in more than 60 years.

The Prompt Month is still in the $3.20–3.80 range that has ruled since early 2012; however, after we hit the bottom of that range on Nov. 5, we moved back to the top only three weeks later. Long-term prices are still closer to the bottom of the range and year-over-year premiums are narrow.

Weather forecasts are calling for extremely cold weather, with deviations of 10-15 degrees below normal for parts of the Midwest, East and South this week. Although not expected to be as cold next week, forecasts are calling for below-normal temps for the next two weeks, into early December.

NEW ENGLAND WARNING: Winter gas basis topped $12/MMBtu last week in New England, due to ongoing concerns regarding supply constraints. Spot gas prices are more than $12/MMBtu for today, with on-peak power near $110/MWh, so expect more volatility in both near-term and long-term prices. There has been so much anticipation for this winter after last year’s volatility that the market’s behavior over this cold snap could be a key indicator, so watch closely.

The EIA reported a withdrawal of 45 Bcf for the week ending Nov. 15, 2013, which was above expectations of 35-40 Bcf, above historicals (36 Bcf in 2012) and above the 5-year average of 2 Bcf. Current inventory through Nov. 15 is 3,789 Bcf, which is only 2.3% below last year and now 0.4% above the 5-year average. Last year's storage peak was 3,952 Bcf, while this year’s peak was 3,834 Bcf - the second highest on record. This week's report will be published on Wednesday as a result of the Thanksgiving holiday on Thursday.

MY SUGGESTIONS: If you don’t need to buy, you may want to hold off because unless the forecast changes, bullish weather forecasts and traders leaving early for the holidays should make it a bad week for buyers. However, keep in mind that next week’s storage report and weather forecasts into mid-December could cause more volatility. You should have a strategy for up or down movements and be ready to move quickly.


MPSC Releases Final Report on Electric Choice in Michigan
On Nov. 20, the Michigan Public Service Commission (MPSC) released their report: Readying Michigan to Make Good Energy Decisions: Electric Choice, which outlines three potential paths for Michigan's energy future. Click here to read more on what this means for Electric Choice in the state.

Posted: November 25, 2013