One of last summer’s biggest hits was Katy Perry’s ‘Last Friday Night (T.G.I.F.)’. I was one of the many who were guilty of humming along, living vicariously through the lyrics, intermittently shouting TGIF (Thank Goodness It’s Friday)! For the natural gas markets, the real action occurs on Thursdays, the day of the weekly Energy Information Agency (EIA) natural gas inventory report. The result can be volatile prices. Since market volatility is generally not end user-friendly, this is a warning to steer clear of buying natural gas and electricity at this time.
Each Thursday at 10:30 a.m. EST, the EIA releases a report of the quantity of natural gas that was either injected into or withdrawn from natural gas storage facilities across the United States. All storage operators are required to submit their operating data so all market participants learn the results at the same time.
If more gas has been consumed than produced, then the shortfall is taken out of storage, also known as a “withdrawal”. If more gas has been produced than consumed, the excess supply is put into storage, and is known as an “injection”. Withdrawals typically occur from November through March due to heating demand and injections occur from April to October when demand is reduced. Of course, there are other factors that can impact storage activity such as gas demand for power generation due to air conditioning needs in the summer, trends in gas production output, increased gas demand due to coal-to-gas switching in the generation stack due to low gas prices or EPA regulations, etc.
Winter 2012-2013 has been virtually nonexistent, just like Manti Te’o’s girlfriend. Pittsburgh Steelers please don’t draft him, let the Browns have him. The lack of winter cold has brought the bears out, pushing the February 2013 prompt contract almost to its all-time low established way back in April 2012. Recently, the market has been bullish because of some colder weather and weaker natural gas storage numbers, including a recent storage report that showed the largest withdrawal in two years! However, longer term market outlook remains overall bearish, but not to the extent of 2012. Consequently, don’t expect natural gas under $2.00 MMBtu anytime soon.
Thus far, this has been a well above normal winter and only sustained below normal temperatures could normalize winter 2012-2013, which brings me to Groundhog Day. I am not talking about waking up and doing the same monotonous thing over and over again like Bill Murray. Fortunately, I don’t have those types of Groundhog days because I get to work with the gregarious and fun Mike Krygowski [a fellow blogger].
It was a bumpy ride this year for natural gas in the United States and in the North Pole. When natural gas prices plummeted earlier in the year, electricity generators switched from using coal to using natural gas. Santa Claus found it economical to do the same in the North Pole.
Then, natural gas turned bullish at the end of 2012. Consequently, the North Pole was “on the margin” like many other generators, forcing Santa Claus to reconsider switching back to coal electricity generation. Continue reading
Did you know that Pearl Street Station in Manhattan, New York, was the first central power plant in the United States? Built by the Edison Illuminating Company, it started generating electricity on September 4, 1882 serving a load of 85 customers with 400 lamps. Two years later, the company served 508 customers with 10,164 lamps. Sadly, the plant burnt down in 1890.
For more information about and to view a photo of the Pearl Street Stations, visit: http://en.wikipedia.org/wiki/Pearl_Street_Station