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Weekly Energy Market Update September 3, 2013

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Please visit the Direct Energy Business online customer education center, Energy Insights, to view the Weekly Energy Market Update for September 3, 2013 from Hans Rottmann, Senior Manager, Market Intelligence.

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

Natural gas futures moved up again, despite a bearish natural gas storage report -and the late summer heat has definitely contributed to the rally. With additional price increases Monday morning, near-term natural gas futures are at their highs since late July, with the Prompt Month up 6 cents to $3.58 and the 12-month Strip up 7 cents to $3.85. Long-term prices however moved up only slightly, with Calendars '14, '15 and '16 closing up 3 cents at $3.94, $4.14 and $4.27 respectively.

Last week the EIA reported a 67 Bcf injection into storage, which was above expectations of 62 Bcf, above last year (64 Bcf) and above the 5-year average (66 Bcf). This is the 22nd consecutive injection that has exceeded the same week last year. Current inventory through August 23 is 3,130 Bcf, which is 7.0% below last year and now 1.5% above the 5-year average.

We are now entering the busy part of the hurricane season through mid-October. There are currently three systems being watched but none appear to be threats to the U.S. This is a sign of increased activity.

Despite recent warmer weather, near-term forecasts are still below 10-year normal; therefore, the duration of the near-term rally is somewhat surprising. Even with the rally, current prices are still a good value compared to historicals.

Other news: (August 27, 2013) Entergy announced that they are closing the Vermont Yankee Nuclear Station (620 MW of power generation) at the end of 2014. This exacerbates an already difficult winter supply situation in New England with more natural gas now being needed for power generation. Gas basis for next winter quickly rose by more than 40 cents after this announcement.

Posted: September 03, 2013