Please visit the Direct Energy Business online customer education center, Energy Insights, to view my Weekly Energy Market Update video for June 17, 2013. Receive weekly updates that are sent right to your email inbox.
The following is a summary of last week’s market activity and the market outlook:
- We experienced the third week in a row of downward price movement — although the downward momentum is slowing, as market direction was choppy. The July NYMEX settled at $3.73 — down 9 cents — after hitting $3.72 on Tuesday (a low since March 13), the 12-Month Strip settled at $3.90 — down 8 cents – after hitting $3.89 on Tuesday (a low since March 12). Calendar 2014 settled at $4.02 — a low since February 22, 2013 and Calendar 2015 settled at $4.15 — a low since September 10, 2012.
- The EIA reported a storage injection of 95 Bcf, which was near expectations but was well above last year and the 5-year average. Current inventory through June 7 is 2,347 Bcf, which is 587 Bcf (20%) less than last year, and 58 Bcf (2.4%) below the 5-year average. Due to moderate weather, expect continued larger-than-normal injections for the next two weeks, which should further reduce the storage deficit. Assuming the weather remains normal, projected end-of-October storage should be approximately 3,825 Bcf, compared to 3,929 last year.
- So far the summer is off to a quiet start, as forecasts for the remainder of June are moderate. Coal prices are also down over the last two weeks, which provides a bit more room.
- Overall weather and storage have been bearish and that would be the key to more downside. However, lower prices should stimulate increased demand (coal-to-gas switching) and suppress supply (shale cutbacks), thereby providing price support — especially if prices get anywhere near $3.50. We still do not expect a repeat of 2012, regardless of weather. Hot weather is a key upside risk but must be sustained for more than a few days to push the NYMEX much higher.