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Weekly Energy Market Update October 21, 2013

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Please visit the Direct Energy Business online customer education center, Energy Insights, to view the Weekly Energy Market Update video for October 21, 2013.

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

The rally that we've seen over the last few weeks ended last week, with prices rising to near 4-month highs due to bullish weather forecasts, and then slowly eased downward throughout the week. The 12-Month Strip reached its highest point since June on Oct. 14, but overall, the forward curve ended the week close to flat compared to the previous week.

Because of the government shutdown, there was no EIA storage report released last week; however, since the EIA has resumed operations, there will be a report released tomorrow for the week ending Oct. 11.  Bloomberg median estimates are for a 77 Bcf injection. As last reported on Oct. 10, current inventory through Oct. 4 is 3,577 Bcf, which is 138 Bcf (3.7%) below last year and 55 (1.6%) above the 5-year average. Assuming normal weather, end-of-year storage is expected to be at 3,801 Bcf, compared to the 3,952 Bcf peak in 2012.

Short-term weather forecasts are calling for below-normal temperatures for the Midwest and Texas and normal temperatures for the Central Plains, West Coast and New England. Longer-term forecasts are calling for below-normal temperatures for much of the U.S., with some warming in the West. November is expected to be slightly milder than 2012, with above-normal temperatures in the upper Great Plains, Canada and New England, and normal temperatures elsewhere. December is forecast to be above-normal in the Southeast up to New Jersey and normal elsewhere. Most winter forecasts have not yet been released but early forecasts are calling for a colder-than-normal winter.

Although the early winter rally ended last week, with prices coming down some, we are still near 4-month highs. And, prices are likely to hold on to a winter risk premium until we see how November-December weather actualizes. The Prompt Month has been between $3.20–3.80 and the Calendar Strips have been mostly in $3.70–$4.50 range since early 2012. We are now near the top of these ranges.

On Tuesday, the U.S. Supreme Court agreed to review some EPA regulations which may have a future impact on power plant emissions. The court will hear arguments early next year and is expected to rule by July 2014.
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Application for Rehearing Filed in Arizona Retail Competition Docket

On Sept. 11, 2013, the Arizona Corporation Commission (ACC), at a regularly-scheduled Commission meeting, voted 4-1 against moving forward with the retail competition proceeding in Arizona. On Oct. 15, Arizonans for Electric Choice and Competition (AECC), together with Freeport-McMoRan Copper & Gold, filed an Application for Rehearing (“Application”) in the generic docket inquiry into retail competition, which was established by the Commission last May. 

Let Your Voice be Heard in Michigan's Future Energy Plans
As we approach 2015, policymakers have been taking a comprehensive look at Michigan's energy future. In response to Governor Snyder's 2013 address on Energy and the Environment, Michigan Public Service Commission (MSPC) Chairman John Quackenbush and Michigan Energy Office Director Steve Bakkal have been working to gather information to help prepare and ensure that Michigan is positioned to make good energy decisions. 

Posted: October 21, 2013

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