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Market Commentary for 2012-01-05
Equity markets were fairly flat today as the Dow Jones Industrial Average was down 2.72 to 12,415.70. U.S. treasuries were down; Gold closed up $7.40 to $1,620.10; and the dollar was up. The Labor Department reported that initial unemployment claims fell 15,000 last week to 372,000. The 4-week moving average of initial claims fell to 373,250, the lowest level since June 2008. Continuing unemployment claims fell by 22,000 to 3.595 million and the number of people receiving emergency and extended benefits increased by 5,000 to 3.505 million. Additionally, ADP reported that U.S. companies added 325,000 jobs in December, which is additional evidence the labor market is continuing to improve. However, Challenger, Gray & Christmas reported that planned firings rose 31% year-on-year in December to 41,785. Planned firings were led by banks and government agencies. The Institute for Supply Management reported that its U.S. services index rose to 52.6 in December from 52.0 in ! the prior month (greater than 50 indicates economic expansion). Overall, today’s economic reports were fairly bullish.

WTI crude closed down $1.41 to $101.81 and Brent crude settled down $0.96 to $112.74. The DOE issued its weekly inventory report this morning and crude stockpiles rose by 2.2 million barrels (expectation was a decrease of 900,000 barrels); gasoline supplies were up by 2.5 million barrels (expectation was an increase of 1.1 million barrels); and distillate inventories were up by 3.2 million barrels (expectation was an increase of 600,000 barrels). In aggregate, inventories rose by 7.9 million barrels, compared with market expectations of an increase of 800,000 barrels. Refinery utilization increased by 0.8 percentage points to 85.0% of capacity (expectation was for utilization to be up 0.3 percentage points).

Natural gas closed down $0.116 to $2.980, the lowest front month close since September 2009. The EIA reported that 76 BCF of gas was withdrawn from storage last week, compared to the market expectation of an 80 BCF withdrawal. Total storage now stands at 3.472 TCF, 11.4% above the same time last year.

This morning, ERCOT trades for tomorrow’s peak hours went through in the mid $20’s and off peak trades went through in the low $20’s. Peak load for tomorrow is expected to be about 36,000 MW. For the next couple of weeks, high temperatures throughout most of ERCOT are forecast to be mainly in the 50’s and 60’s while occasionally reaching into the 70’s. Forward heat rates were stronger today as summer 2012 was up about 35-40 ticks.

Market Commentary for 2012-01-03
Equity markets were strong today as the Dow Jones Industrial Average was up 179.82 to 12,397.38. U.S. treasuries were down; Gold closed up $33.70 to $1,600.50; and the dollar was down. The Institute for Supply Management reported that its U.S. manufacturing index climbed to a six month high of 53.9 in December from 52.7 in the prior month (readings above 50.0 indicate expansion). Additionally, the Commerce Department reported that construction spending increased 1.2% in November. Both reports indicate positive momentum for the economy at the end of 2011.

WTI crude closed up $4.13 to $102.96 and Brent crude settled up $4.75 to $112.13. The positive economic data mentioned above along with additional unrest in Iran caused crude to be very strong today. Iranian officials warned the U.S. to stay out of the Persian Gulf after an American aircraft carrier left port in Dubai. Iran has warned it will close the Strait of Hormuz if western nations impose additional economic sanctions on the country. The Strait of Hormuz is the pathway for about a third of all worldwide waterborne crude, so it is a very important stretch of water.

Natural gas closed up $0.004 to $2.993. Forecasts for the next 6 to 10 days indicate most of the nation will have above normal temperatures, which should keep a lid on demand for natural gas.

This morning, ERCOT trades for tomorrow’s peak hours went through in the mid $20’s and off peak trades went through in the low $20’s. Peak load for tomorrow is expected to be about 38,000 MW. For the next couple of weeks, high temperatures throughout most of ERCOT are forecast to be mainly in the 50’s and 60’s while occasionally reaching into the 70’s. Forward heat rates were mixed today as the summers were slightly weaker and the shoulders were generally stronger. On December 30, it was reported that the EPA must delay the implementation of CSAPR because a federal court ruled on the side of electric power producers and granted a stay pending court review. The court will likely hear the case by April.

Market Commentary for 2011-12-12
Equity markets were weak today as the Dow Jones Industrial Average was down 162.87 to 12,021.39. U.S. treasuries were up; Gold closed down $48.60 to $1,668.20; and the dollar was up. Fitch Ratings reported today that it is predicting a “significant” economic downturn in Europe in the near-term and last week’s summit “does little to ease pressure” for the crisis. This caused most markets to fall off today. There were no major economic reports today.

WTI crude closed down $1.64 to $97.77 and Brent crude settled down $1.36 to $107.26. Crude was weak on the strong dollar, the lack of any major progress on the European debt situation, and the remarks by the credit ratings agencies mentioned above.

Natural gas closed down $0.063 to $3.254, the lowest settle since September 11, 2009. Weather forecasts for the rest of December are indicating above normal temperatures in the Northeast and Midwest, so heating demand should be below normal for the rest of the month. The lack of demand along with very high storage levels keeps the bearish picture intact.

This morning, ERCOT trades for tomorrow’s peak hours went through in the mid $20’s and off peak trades went through in the low $20’s. Peak load for tomorrow is expected to be about 37,000 MW. Other than a brief spike into the 70’s during the middle of this week, high temperatures throughout most of ERCOT are forecast to be mainly in the 50’s and 60’s for the next couple of weeks. Forward heat rates were fairly flat today.

Market Commentary for 2011-12-06
Natural gas closed up $0.026 to $3.487. The EIA cut its 2012 natural gas price forecast by 10.4% to $3.70/mmbtu. Record high inventories, increasing production, and mild weather have hit demand over the last couple of months. Demand is forecast to increase 1.7% in 2012 to 68.4 BCF per day. Based on this data, the EIA is now forecasting end of winter storage levels (March 2012) to be at a record high of 1.83 TCF.

Solyndra backers defend EPA regulations
Stop the Energy Freeze
The guys who told us that Solyndra was a good deal now tell us that we don't need to worry about the electrical grid even though EPA's regulations will close a bunch of power plants. What do you think? Do you trust Obama's Department of Energy? Have your say in the COMMENTS below.

Here's a list of power plants EPA's regulations will shut down:

http://www.instituteforenergyresearch.org/2011/10/07/ier-identifies-coal-fired-power-plants-likely-to-close-as-result-of-epa-regulations/

In case you have forgotten about Solyndra here a little refresher:

http://www.youtube.com/watch?v=wGBc7ROxKi4
The Energy Department said Thursday that upcoming air pollution regulations will not threaten the reliability of the country’s electric grid, the latest effort by the Obama administration to counter claims by Republicans and industry officials that the rules could cause power outages..

Market Commentary for 2011-11-29
Equity markets were stronger today as the Dow Jones Industrial Average was up 32.62 to 11,555.63. U.S. treasuries were down; Gold closed up $2.60 to $1,713.40; and the dollar was down. Italy had a bond auction today in which the country had to pay yields above 7% in order to attract enough investor interest. These are similar yields to what Portugal, Greece, and Ireland ran into before seeking external bailouts. The Conference Board reported that its consumer confidence index rose to 56 in November from 40.9 in the prior month, the largest monthly gain since April 2003. The hope is that the improvement in consumer confidence will show itself in household purchasing, which represents 70% of the U.S. economy. The S&P/Case-Shiller 20 city index of property values fell 3.6% year-on-year in September as the housing market continues to show signs of trouble. The FHFA home price index reported that U.S. home prices fell 3.7% year-on-year in September, so it basically confirme! d the data from the S&P/Case-Shiller report.

WTI crude closed up $1.58 to $99.79 and Brent crude settled up $1.82 to $110.82. Tomorrow is the weekly DOE inventory report and the market is expecting crude stocks to be down by 500,000 barrels; gasoline supplies to be up by 1.3 million barrels; and distillate stockpiles to be down by 1.1 million barrels. Refinery utilization is expected to be unchanged at 85.5% of capacity.

Natural gas closed up $0.108 to $3.633. Weather forecasts are mixed for the next couple of weeks as cooler temperatures are expected in the South and Southwest while warmer temperatures are forecast for the East Coast.

This morning, ERCOT trades for tomorrow’s peak hours went through in the upper $20’s and off peak trades went through in the mid $20’s. Peak load for tomorrow is expected to be about 39,000 MW. High temperatures throughout most of ERCOT are forecast to be in the 50’s and 60’s for the next couple of weeks. Forward heat rates were fairly flat today.

Market Commentary for 2011-11-16
Equity markets were weak today as the Dow Jones Industrial Average was down 190.57 to 11,905.59. U.S. treasuries were up; Gold closed down $7.90 to $1,774.30; and the dollar was up. The Federal Reserve reported that industrial production in the U.S. improved 0.7% in October, reflecting a bit of positive news for the economy. The Labor Department reported that the consumer price index fell 0.1% in October, indicating inflation concerns may be waning. The National Association of Home Builders reported that its NAHB Housing Market Index increased 3 points in November to a level of 20. This is the highest level the index has seen since May 2010, however, this is still a very weak number considering readings above 50 are considered “good.” The Mortgage Bankers Association reported that its index of mortgage application activity fell 10% last week. Refinancing applications fell 12.2% and mortgage purchase applications fell 2.3%. The refinance share fell from 78.6% to 77.3%! of total mortgage applications.

WTI crude closed up $3.22 to $102.59 and Brent crude settled down $0.30 to $111.88. Enbridge and Enterprise Partners reported that the Seaway Pipeline will be reversed , allowing 150,000 barrels per day of crude to move out of Cushing, OK by the 2nd quarter of 2012 and up to 400,000 barrels per day by 2013. This should free up the crude-congested area around Cushing and allow better access to the crude that is landlocked in the area, thereby increasing the value of NYMEX delivered crude. This news narrowed the Brent/WTI spread from $13.02 yesterday to $9.29 today (note: the December Brent contract expired yesterday and the WTI contract expires on Friday, so it’s not exactly apples to apples, but the general magnitude and direction is what really matters). The DOE issued its weekly inventory report this morning and crude stockpiles decreased by 1.1 million barrels (expectation was a decrease of 800,000 barrels); gasoline supplies were up by 1.0 million barrels (expectatio! n was a decrease of 1.1 million barrels); and distillate inventories were down by 2.1 million barrels (expectation was a decrease of 3.0 million barrels). In aggregate, inventories decreased by 2.2 million barrels, compared with market expectations of a decrease of 4.9 million barrels. Refinery utilization increased by 2.2 percentage points to 84.8% of capacity (expectation was for utilization to increase by 0.2 percentage points).

Natural gas closed down $0.060 to $3.344. Tomorrow is the weekly EIA storage report and the market is expecting to see an injection of 27 BCF for the week ended November 11. Last year saw on injection of 1 BCF and the 5-year average is 10 BCF. If the estimate is correct, inventories would stand at 3.857 TCF, 6.4% above the 5-year average and 0.6% above last year.

This morning, ERCOT trades for tomorrow’s peak hours went through in the upper $20’s and off peak trades went through in the low $20’s. Peak load for tomorrow is expected to be about 33,000 MW. After a brief cool-down over the next couple of days, high temperatures throughout most of ERCOT are forecast to be in the 70’s and 80’s through next week. Forward heat rates were weaker today as summer 2012 and 2013 were both down about 50 ticks.

Market Commentary for 2011-11-15
Equity markets were slightly stronger today as the Dow Jones Industrial Average was up 17.18 to 12,096.16. U.S. treasuries were down; Gold closed up $3.80 to $1,782.20; and the dollar was up. The Commerce Department reported that U.S. retail sales improved 0.5% in October, creating optimism about consumer spending that represents about 70% of the economy. The Labor Department reported that the PPI fell 0.3% in October as the cost of energy and automobiles decreased. The core-PPI, which excludes food and energy, was unchanged from the prior month – marking the first month without an increase since November 2010. This indicates inflation threats may be waning.

WTI crude closed up $1.23 to $99.37 and Brent crude settled up $0.50 to $112.39. Tomorrow is the weekly DOE inventory report and the market is expecting crude stocks to be down by 800,000 barrels; gasoline supplies to be down by 1.1 million barrels; and distillate stockpiles to be down by 3.0 million barrels. Refinery utilization is expected to increase by 0.2 percentage points to 82.8% of capacity.

Natural gas closed down $0.054 to $3.404. Gas has not settled this low since October of 2010. Mild weather forecasts continue to beat down the heating demand expectations for the next couple of weeks.

This morning, ERCOT trades for tomorrow’s peak hours went through in the low $30’s and off peak trades went through in the low $20’s. Peak load for tomorrow is expected to be about 36,000 MW. Other than a brief cool-down on Wednesday and Thursday, high temperatures throughout most of ERCOT are forecast to be in the 70’s and 80’s for the next couple of weeks. Forward heat rates were relatively flat today as the summers were down a few ticks and the shoulders were up a few ticks.

Supplies Are Up – Prices are Down
[caption id="attachment_154" align="alignleft" width="292" caption="Supplies Are Up – Prices are Down"][/caption]By Stephen Johnson, Portfolio Management - FCP

The gas market continues to reflect the burgeoning supply picture. Stockpiles grew a further 37 Bcf in the week, closing in on 4.0 Tcf as a season ending stock. Prices lost another 20 cents on the week, and continue lower this week. With winter gas near $3.50, it might take a fire sale to send the winter strip much lower. Risk/reward doesn't favor adding fresh shorts, and longer term strip prices are also running out of bear rewards, as the curve remains very flat.
A technical view suggests a bottom could be a way off ($3.25, $3.00 then $2.40), The weekly chart broke to the moving averages, but then failed, prompting a lower opinion. However, seeking the endorsement of fundamentals, a cold winter threat and the lack of desire of producers to "lock in" $3.50-.60, do give plenty of caution.
In the macro economic world (one which is somewhat detached from U.S. natural gas prices) a lack of consensus on the European front leaves us feeling this fragile 'union' might be facing a rather large bill in the near future. The cost of exiting "the Euro Project" could be too much to stomach. As we’ve discussed before, consequences reach far and hard, so a disenfranchised and disillusioned Europe will hurt the US economy, and a lack of consumption may send Asian expansion into holding pattern.

Natural gas prices are DOWN - 12 month strip $3.71