Posted on 05/06/2003 12:02:45 PM PDT by BOBTHENAILER
June (NYMEX) soars 43.4 cents
Heating demand in the Northeast and cooling demand in the South and West combined to spark a huge rally on the June NYMEX futures contract, which surged 43.4 cents on Monday to settle at $5.689/MMBtu.
Alaron Trading analyst Phil Flynn said low gas storage inventories also were a supporting factor in Monday's run-up. "The market is vulnerable to the supply side of the equation. The supply issue is still at the back of traders' minds." he said.
Heating-degree days were higher than originally forecast, said IFR Pegasus analyst Timothy Evans, and a stronger petroleum complex has also contributed to bullish sentiment in the gas market in recent days, helping to fuel the rally.
The June contract opened unchanged from Friday at $5.255 and raced up in early trading to cross the $5.50 mark. Prices continued to climb and peaked at $5.715 toward the closing bell. The differential between the NYMEX June and July contracts narrowed slightly to reflect the strength of the prompt-month contract, traders noted.
Other factors contibuting to the cash run-up on Monday included nuclear plant outages in the Northeast, Southeast and Texas, and a Salomon Smith Barney weather report predicting normal to above-normal temperatures across much of the nation this summer.
In the Northeast, which was experiencing termperatures 20 degrees below normal and a cold rain.
With Florida high temperatures reaching the mid-90s, Florida Gas Transmission said it may issue an overage alert day today in its market areas to ensure line pack doesn't fall too low. As air conditioners cranked across the state, Florida city-gate prices climbed more than a dime to average $5.67.
Florida Power and Light said its Turkey Point-3 reactor in Miami had reached 100% power early Monday after having been shut down late last month due to failure of an isolation valve. Also in the southeat, Duke Energy shut down the Oconee 3 unity in South Carolina for refueling and maintenance.
The above excerpt, read carefully, shows how thin the margin is for current natural gas prices, read on for more gloom and doom.
GOV'T to producers: Step up deep gas drilling
The study , unveiled at the Offshore Technology Conference in Houston, found that 45 new deep gas wells completed on the shelf during 2001 and 2002 are expected to decline to half their peak rates in "closer to 24 months than 48 months". That is far too quick a decline given that deep plays below 15,000 feet are thought to hold the last remaining large gas reservoirs on the shelf and perhaps the most mature producing basin on the planet, MMS said.
Chris Oynes, MMS regional director for the Gulf, said the steep decline in shelf production has "set off alarms" because 25% of U.S. gas supply comes from the Gulf and 80% of total Gulf production occurs on the shelf.
"Industry is going to have to step up to the plate," Oynes said on the conference sidelines. "The level of activity really has to increase to have an impact on this."
Gas production from the shelf declined about 29%, to 3.36 Tcf, in 2002 from 4.76 Tcf in 2001, MMS said. Even with a good-sized discovery on the shelf, "it would take a lot of those to arrest that decline," Oynes said.
The MMS report also showed that the number of deep gas wells drilled on the shelf fell to 64 in 2002 from 75 in 2001 and 86 in 2000, although at least some of the pullback in drilling could be attributed to low commodity prices and reductions in capital spending.
That's a whopping drop of 9.2 BCF per day (without hurricane disruption). Considering the addition to storage for the week ending 4/25 of 57 Bcf, you can easily see why these declines represent a threat to pricing. Canadian gas production is also seeing a similar decline. Keep in mind new drilling in the Gulf takes at least one to three years to get to market.
All wet? Analyst says gas volumes overstated
With first-quarter operating results in hand from about one-third of the 100 largest U.S. producers, analyst Jefferies & Co. estimated in a report Monday that domestic gas output declined by 1.7% from the first quarter of 2002 but rose 1.1% from Q4 2002.
However, Jefferies cautioned that quarterly production levels probably are exagerated by as much as 600,000 Mcf/day because some producers are reporting unprocessed, or "wet" gas, rather than processed dry gas.
The 32 firms that have released results so far represent 59% of expected Q1 volumes. After adjustments for storm losses and acquisitions, Jefferies estimates that out-put fell to 27.416 Bcf/day from 27.9 Bcf/day, or 1.7%. Excluding deep-water volumes, that decline jumps to 5.7%.
The slide in reported volumes occured despite unusually high gas prices and stepped up drilling activity during the winter, Jefferies noted. "This data is a strong indication that U.S. supplies have not reversed declines and that, in fact, these declines have not mitigated much in terms of their severity." A pattern that is "bullish for gas prices and presumably bullish for gas stocks."
And the picture might be even more bullish than meets the eye. "We have disclosed our opinion that producers were not stripping liquids from the gas stream in Q1 2003, rather selling their production "wet". The end result of this sort of activity is that reported production may be exaggerated."
Jefferies estimated that more than half of the producers in the survey similarly report their volumes on a "wet" basis. "If we apply these factors to the top 100's expected reported gas production....this would mean supplies are overstated by as much as 600,000 Mcf/day," the report said.
All the more reason to oppose, obstruct, frustrate and generally eradicate all environmental groups whose years of propaganda and legal obstruction have contributed to the present supply/demand imbalance, which is only partially explained above.
New York, May 5 (Bloomberg) -- Wholesale power prices fell in parts of the U.S. Northeast as increased imports from Canada and production from nuclear plants returning to service boosted supplies.
"There's lots of power moving down from Canada now," said Richard Zimbone, senior analyst with Boston-based EnvaPower Inc., which provides price forecasts for power traders.
About 1,550 megawatts of imports are scheduled for today, compared with 650 megawatts on Friday, according to ISO-New England, the region's grid operator. One megawatt can power 800 typical U.S. homes.
Power for delivery tomorrow at the New England Power Pool fell $7.25, or 12 percent, to $51 a megawatt-hour at 9:31 a.m. local time, according to Bloomberg data.
In New York, Constellation Energy Group Inc.'s 614-megawatt Nine Mile Point 1 nuclear plant in Lycoming, New York, near Syracuse, was operating at 90 percent capacity this morning after completing feedwater pump repairs, said spokesman Robert Burtch.
At full capacity, the plant can supply power to about 500,000 homes.
Power for delivery tomorrow in Zone G, which includes areas north of New York City, fell for the first time in five sessions, by $4.15, or 7.2 percent, to $53.88 a megawatt-hour. Western New York's Zone A declined $1.13 to $47.
Power for delivery tomorrow at PJM Interconnection, the network serving most of the Northeast, rose for a seventh consecutive session, by 81 cents, or 1.6 percent, to $51.50 a megawatt-hour.
June PJM futures were up for a fourth trading day, by $1.35, or 2.4 percent, to $58 a megawatt-hour on the New York Mercantile Exchange at 10:02 p.m. local time.
FirstEnergy Corp.'s 821-megawatt Beaver Valley-1 nuclear plant in Shippingport, Pennsylvania, near Pittsburgh, increased production to 88 percent, from 45 percent Friday, following completion of a refueling outage, the Nuclear Regulatory Commission said.
The increase adds 353 megawatts to the market, or enough power to supply about 300,000 typical homes.
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However, I sure don't see any new ones coming on line any time soon, and that, my FRiend is a crying shame. The ever increasing power production from relatively non-polluting gas fired turbines accounts for better than 30% of total US power output, I think. For better or worse, as long as the supply/demand natural gas problem exists, no other power source can severely mitigate any huge price increases in NG. Fuel oil can be switched to in the NE, but only in the NE.
U.S. West Electricity Prices Decline Amid Boost in Hydro Production
San Francisco, May 5 (Bloomberg) -- Wholesale electricity prices in the U.S. West dropped after a rainstorm boosted power production at hydroelectric dams in California.
San Francisco received almost an inch of rain over the past three days, according to AccuWeather.com. That's more than triple the normal amount of precipitation for this time of year, the forecaster said.
"We're kind of on the tail end of that storm we had, and should get some pretty decent runoff here the next couple days," said Steve Hance, an electricity trader at Silicon Valley Power, the municipal utility in Santa Clara, California. "Hydro use is way up, so that's pushing prices down a bit."
Wholesale power in Northern California dropped $3.48, or 8.5 percent, to $37.50 a megawatt-hour at 6:51 a.m. local time, according to Bloomberg data. The price rose 13 percent on Friday. Southern California electricity fell $2.59, or 6.1 percent, to $39.64 following a 10 percent boost on Friday.
In California, power use will likely peak at 27,964 megawatts tomorrow, down from a forecast peak of 28,174 megawatts today, according to the California Independent System Operator, the agency that manages the state's power grid. One megawatt can power 800 typical U.S. homes, the U.S. Energy Department estimates.
At the California-Oregon border, electricity dropped $1.50, or 4.2 percent, to $34 a megawatt-hour. At Washington's Mid- Columbia trading point, a benchmark for the Northwest, the price declined 88 cents, or 2.8 percent, to $30.32. Mid-Columbia power traded as low as $30 a megawatt-hour this morning on the Bloomberg PowerMatch trading system.
At the Mead substation, near Hoover Dam at the border of Nevada and Arizona, wholesale power fell 83 cents, or 2.1 percent, to $38.17 a megawatt-hour.
Arizona Public Service Co.'s Palo Verde 3 nuclear reactor in Wintersburg, Arizona, is producing 100 percent of its 1,270- megawatt capacity after being taken out of service March 29 for refueling, utility spokeswoman Sheri Foote said. The plant restarted on April 30. -Daniel Taub
yitbos
Here's the one I was referring to.
Construction of a pipeline to bring the North Slope gas cap would lower prices and bring much needed supply.
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Wholesale power in Northern California dropped $3.48, or 8.5 percent, to $37.50 a megawatt-hour at 6:51 a.m. local time, according to Bloomberg data. The price rose 13 percent on Friday. Southern California electricity fell $2.59, or 6.1 percent, to $39.64 following a 10 percent boost on Friday.
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I thought the power was more expensive here on the West Coast. Hmmmmm!
Agrees with most everything I see, hear and read; long or short term. Maybe we can finally have some price security.
The pipeline you describe is at least 5 years away, no?, if they started today and the only other relief in sight is LNG, but not until late 2005.
That is, of course, if the Shrillary's of the world will let them be built.
Saw an article last week that stated CA could be in trouble if temp is even slightly above norm. The reason stated was hydro was so low historically, that the demand would have to be made up with gas-fired.
Interesting articles you've posted....you trade megawatts?
yitbos
It only makes sense to do if the company can recoup its investment in building it, but completion of it will flood the market with gas, dropping the price per mcf. That's why there has been discussion about setting a "floor" price for the gas, so that if gas drops below that level, the oil company will get a tax credit equal to the difference.
The future for North America lies in the sand.
yitbos
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