Natural Gas Market News

Natural Gas Market Update – 2/15/2018

 

Storage Report – 02/15/2018

Thursday’s storage report cited a withdrawal of 194 Bcf, while estimates centered around a 188 Bcf pull. Last year for the same week there was a withdrawal of 120 Bcf and the 5-year average withdrawal is 154 Bcf.

Working gas in storage was 1,884 Bcf as of Friday, February 9th, 2018, per EIA estimates. Inventory was reported at 577 Bcf (-23.4%) less than last year for the same week and 433 Bcf (-18.7%) less than the 5-year average of 2,317 Bcf.

 

 

Natural Gas Trends:

March NYMEX: Settled Thursday down less than a penny at $2.58/Dth.

Seasonal Strips:  The upcoming summer strip (APR18-OCT18) settled Thursday at $2.701/Dth, down 5.0 cents from the week prior. Next year’s winter strip (NOV18-MAR19) settled Thursday at $2.917/Dth down 5.8 cents from last week.

12 Month Strip: Settled Thursday at $2.765/Dth, down 5.9 cents from the week prior.

Summary: This week’s EIA storage report withdrawal of 194 Bcf came in above the projected draw of 188 Bcf and the market displayed little reaction to the news, remaining virtually flat.
Although demand for natural gas has been up over the last few weeks, the market is staring at increased production numbers and a warming trend which should keep prices from increasing. NOAA forecasts for the end of February show a return to normal-to-above-normal temperatures for the eastern 2/3rds of the country immediate to the end of March trading, which is also the end of winter trading.

Nexus Pipeline Development Facing “Batty” Road Blocks

The Nexus pipeline project has run into countless hurdles and road blocks ever since its initial proposal last year. We first reported on the Nexus project back in March of 2016. The intent of the project is to support the growing demand for clean-burning natural gas, by building additional pipeline infrastructure in Ohio, Michigan, and Ontario (Canada). Following completion, the pipeline system is expected to move 1.5 Bcf/d (billion cubic feet a per day) of natural gas from southeastern Ohio, eventually ending in southern Ontario.

As of last March, 13 connection agreements were made with various Ohio markets affected by the proposed route. Since then, the project has faced turbulence from activist groups and countless townships. Just in the last couple of weeks, objection efforts have made news on several occasions. Just a few of these examples are below:

• The city of Green, Ohio has hired law firm, Frost Brown Todd to aid in the city’s fight to reroute the pipeline away from the city. City officials believe the pipeline will have a $120 million impact on the city.
• Bowling Green city Council voted months ago to deny an easement offer to build part of the pipeline through the city, and now has protesters on the proposed ground attempting to further stall its construction. UC4POWER a local activist group and BGSU faculty believe the pipeline could contaminate local water supply.
• One of the most peculiar reports comes from Medina County, where “the coalition to reroute Nexus” cites bats as an argument against pipeline construction. This part of the state is home to northern long-eared bats, a threatened species. As a threatened species, their habitat is supposed to be protected during the bats’ nesting season, but the coalition is fearful that Nexus could be granted an exception.

In attempt to avoid more conflict, Nexus pipeline partners asked FERC (Federal Energy Regulatory Commission) to expedite the decision to grant permission by February 3rd, to build the pipeline, before one of the FERC commissioners steps down. FERC was inactive in response. The Nexus project isn’t dead yet, but at the moment, the future does appear uncertain.

 

Natural Gas Producers’ Bankruptcies and its Impact on Gas Production

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As of May 16th – 77 natural gas and oil producers in North America have filed for bankruptcy since 2015, and 35 of those have done so since the start of 2016…

A recent study conducted by PointLogic Energy explored how much production is represented by these 77 companies, where they are located and the overall impact it is having.

The analysis concluded that 4.4 billion cubic feet per day of gas production and 307,000 barrels per day is represented by the bankruptcy companies.  The production of these companies represents 5.4% and 3.6% of the lower-48 states’ gas and oil production respectively.

 

Some major takeaways from the review:

  • The volume of gas attributed to the companies in bankruptcy is much larger than the corresponding volumes of oil.
    • For Example: In Texas 7.5% of natural gas production is bankrupt while only 2.8% of oil production is represented.
  • There are regional winners and losers: Of the major producing states, Texas, Wyoming, Oklahoma and Louisiana bear the brunt of bankruptcy related volumes. The Northeast and Gulf of Mexico appears largely unscathed.

The overall takeaway when reviewing the companies that have filed for bankruptcy is that they are highly weighted to natural gas, rather than oil products.

So what does it mean going forward? If oil prices recover and producers increase drilling we will likely see an increase in associated gas production, regardless of what natural gas prices are doing. Rising gas production from the associated oil production will inflict even more troubles for the bankrupt market segment with storage constraint worries. The remaining summer looks to be a difficult price environment for natural gas producers, especially in the Texas, Oklahoma, Wyoming and Louisiana regions.

 

Understanding Commodity Markets

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We’ve all been there before. While driving along we notice gasoline prices are lower than usual, so we pull in, top it off, and take advantage, despite the fact that we still have half a tank left. Then, the next morning we drive by that same gas station and see prices dropped an additional 10 cents. Or, we skip filling up and see gasoline prices have jumped 30 cents… So what gives?

The same volatility occurs in the natural gas and electric market. When dealing with commodities we are often damned if we do and damned if we don’t.

Energy prices are constantly on the move, and much like gasoline prices, a myriad of reasons come into play. Supply and demand is not always what moves the market. Factors such as storage levels, weather, a full moon, a trader having a bad day can swing the pendulum. Obviously I joke with the latter two but the point remains, it’s difficult to understand why these movements happen.

In today’s market I would assume that “energy saving” calls have picked up frequency in recent weeks. Why? Because marketers will develop a pitch based on the market being up or down. If the market goes up, they claim it’s a good time to get out. If the market goes down, they claim it’s a good time to get out. According to them, you should always be signing up. Yes, rates today might be lower than last year, but comparing your price then, to today, is not telling the whole story…

Just like mortgage rates, they change over time. Years ago 8% was the norm, whereas rates today are now below 4%. Did you make the wrong decision, pay too much, or get ripped off at 8%? No, at the time that was the market, and markets shift in time.

Buying in a down market is easy, you buy savings but understanding all that lies below the surface within that price is key. Energy components, operational changes, contract terms, program options, are all things to consider when jumping back in. Simply picking a rate is a short sighted reaction to a complexity that goes much deeper.

To learn more about your options, the market, and the things you can do to adjust costs, contact your energy representative. Your business is important, make sure you are asking the right questions. An in depth review and explanation is what it deserves, not just a “pick your price” approach in a commodity world that’s as volatile as the local gas station.

 

Tap Into This

newsletterarticlenexussheader

Beer would be nice, but I don’t think that is what is going to be flowing through the proposed Nexus Transmission Pipeline.
The Nexus pipeline project is a joint venture between DTE Energy and Spectra Energy to move 1.5 Bcf (Billion cubic feet) a day of natural gas from southeastern Ohio (Utica and Marcellus shale) eventually ending at the Dawn Hub in southern Ontario, Canada.

2014_0808_Landowner Notification Attachments -FINALAdditional pipeline transportation infrastructure is needed in Ohio, Michigan and Ontario, Canada to support the growing demand for clean‐burning natural gas.

To meet this need, Nexus Gas Transmission (NEXUS) proposed to construct an approximate 255‐mile interstate natural gas transmission pipeline. The pipeline would transport gas directly from the Appalachian Basin and provide low cost supplies while providing increased supply diversity, security and reliability to customers in Ohio, Michigan, and Canada. 

A number of industrial facilities, gas utilities and power generators in these areas have also recently signed interconnect agreements with the project. If approved, gas is projected to start flowing in November of 2017. 

 

Click on the links below to find out more information regarding the proposed path, local meeting with the EPA on 3/16/2016 for the compressor station or some of the concerns that have been in the local paper.

 

Additional Nexus Info:

Proposed Nexus route map

Toledo Blade: Law firm soliciting landowners to fight NEXUS gas pipeline

 

Pool Customer Savings to Grow to 23% in 2016

Choice Pool Flyer 2016 AES for website - 3.1.16

The PUCO recently announced Columbia Gas of Ohio (COH) will be increasing their Standard Choice Offer (SCO) from $0.129/Ccf (or $1.29/Mcf) to $0.143/Ccf (or $1.43/Mcf), effective in April, 2016. >. Full PUCO media release here

While the SCO rate is going up, we have negotiated our CHOICE pool rate to remain at $0.110/Ccf (or $1.10/Mcf) through March 31, 2017, increasing your savings against the SCO rate to 23%.


Join Today It’s Simple

Fill out the online enrollment form and take over you energy today

For more information on this program, >. Click Here

 

 

What’s the value of a ‘good’ broker/agent/consultant?

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If you haven’t noticed by now, there are a lot of people in the “energy” business eager to help you find a better deal. Customers tell us they get 100’s of calls, each one offering a better program and a lower price if you sign up today.
I venture that over 95% of the energy calls received are from a call center which are hired guns that are only dialing for dollars in search of new business acquisition. Their business model is set up to make money on signing up new customers, not the ongoing account management of your program.
If you’re looking for more in an energy advisor, then the following should help you screen energy calls to identify the 5% of the energy calls you should investigate further.

 

Here are some observations and/or questions that may help you evaluate and/or eliminate some of the noise just by understanding how to spot the call center:

 

If you can hear all the other telemarketers in background….tell them to put you on their do not call list and hang up!

Period…

The caller represents that they are “with the utility and wanted to make you aware of”……….

Think back, utilities don’t call customers. They communicate via notices on their bill and if they need to terminate service they just show up.

The caller is pushy about getting you to provide information from your utility bill, like your account number, your rate, etc.

Selling over the phone has to be simple. The simplest comparison is price and that is why the call center wants to know your rate. Anyone can offer a lower price but, will it be an apples to apples comparison to what you have?

If the caller can tell you a price without knowing your usage, or by saying your current agreement is up for expiration….run!

Most call centers are pricing out of the next start month. If your contract expires in 12 months and you switch, you will be exposed to early termination fees.

Our advice to customers is if you can’t eliminate the call from one of the above comments, then consider requesting more information from the energy broker/consultant, they should be happy to send it to you.
Now, understand that not all energy advisors are created equal. To narrow your search for the trusted energy advisor that best fits your needs, consider the following questions:
Ask yourself do you understand the energy market, do you understand how cost components impact your price, do you know what to look for in a supply agreement?

If you answered NO; then narrow down your search to brokers /consultants that are independent of the supplier, meaning they represent multiple suppliers. How long has the firm been managing the energy needs of businesses?

Ask what their broker’s fee is?

If they say they don’t charge a fee, that the supplier pays them…you should run!

Their response is the half-truth. True, the supplier pays the broker, but it is the broker that determined the fee that the supplier includes in the price.

For this reason, transparency is of huge importance as they should be more than willing to document their fee and put it in writing.

How long has the firm been managing the energy needs of businesses?

Longevity, especially in a service industry, supports strong customer service. Customer retention is a sign that the broker/consultant is demonstrating strong customer service and market knowledge.

What is the company’s scope in both service and product offerings? Are they willing to come and meet with you, face to face to explain some complex topics?

That should provide you with a level of comfort that they are not in this for a quick “sale” but are interested in working for you as an integral part of your business.

Ask questions to get comfortable with the energy advisor, it’s your most important decision.

Since most customers don’t really have the time/desire/knowledge to keep abreast of the energy market, selecting the right energy advisor is a customer’s biggest decision. Make sure fees are transparent and documented and they work to develop an energy strategy that services your needs based on your business, risk tolerance and corporate objectives.

 

You want to make sure your broker/advisor is on your side and working for you. The true consultants or advisors will ask questions before ever asking to see/review a utility invoice. They will be able to explain what types of programs may fit your needs, and options to consider.

A true advisor will be able to update you on any upcoming regulatory or policy changes that will impact your business. Selecting the right broker takes time, do you homework, selecting the wrong broker could cost you more than you think.