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Weekly Energy Market Update May 27, 2014

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Below is the Direct Energy Business Weekly Energy Market Update for May 27, 2014. There is no video this week, but the written summary is below.

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

Mild weather and the holiday weekend suppressed gas demand and spot natural gas prices fell significantly. Some Northeast trading points were below $3.00/MMBtu for the first time since the fall of 2012.

Natural gas production posted a new all-time record of 68.2 Bcf/day (according to Bentek Energy).

Storage injection of +106 was above expectations and contributed to market declines, but storage deficit is still huge.

The market continues to focus on storage and the huge deficit. Recent large injections are not enough to erase deficit. Storage deficit is expected to be sustained going into next winter, but the question is how big will it be?

2015 and 2016 are still in backwardation with contango thereafter. Forwards are below $5.00 all the way to 2020.

PJM announced results of capacity auction for 2017-18 and were higher than expected. (There is too much detail for this report). Results were attributed to reduced imports, changes to DR and costs of environmental compliance.

There was little change in market outlook last week, as overall focus remains on storage replenishment and summer weather.

Posted: May 27, 2014