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Weekly Energy Market Update September 30, 2013

By Direct Energy Business
Energy Market Update

Please visit the Direct Energy Business online customer education center, Energy Insights, to view the Weekly Energy Market Update for September 30, 2013.

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

Last week was a week of solid declines (all five days, or nine consecutive days if you include Monday morning, declines of another 7 cents), which offset the previous week’s gains. The market traded within its recent range and fell due to a strong storage injection and forecasts for mild temperatures. Long-term Calendar Strips fell with the near-term.

Last week the EIA reported an injection of 87 Bcf, which was above expectations and above last year (79 Bcf) and the 5-year average (75 Bcf). Twenty-one out of the last 22 weeks have had larger storage injections than the same week last year. Current inventory through September 20, 2013 is 3,386 Bcf, which is 5% below last year and now 0.9% above the 5-year average.

We are now in the peak of hurricane season but there are no threats to North America, as the season has been a bust. In addition, there have been no other changes to supply, as domestic production remains near record levels and imports remain low.  Production is down slightly year-over-year due to pipeline maintenance and lost production due to Colorado flooding, but neither factor is expected to have an impact beyond a few weeks.

There is little reason to expect a breakout of the market’s range anytime soon. Shoulder month weather is mild and hurricane season has been non-existent, but prices are likely to hold on to a winter risk premium until we see how November and December weather actualizes. The Prompt Month has been between $3.20–3.80 and the Calendar Strips have been mostly between $3.70-$4.50 since early 2012.

Long-term fundamentals remain bullish compared to near-term, due to EPA regulations, liquefied natural gas (LNG) exports and industrial demand, so the extent of the long-term declines should be limited, regardless of near-term movements. If you believe in the range, then prices near the bottom of the range present a buying opportunity, which is where we are.

Other News:
NYISO to Establish New Capacity Settlement Zone

The Federal Energy Regulatory Commission (FERC) recently approved the New York Independent System Operator's (NYISO's) request to establish and recognize a new capacity zone that would encompass NYISO Load Zones G, H, I, and J (the G-J Locality in downstate NY). This is expected to cause an increase in capacity rates for customers in Load Zones G-J. If you missed the webinar we hosted last week, click here to access the educational materials.

Posted: September 30, 2013

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