Western Price Survey
Week's End Edition
Lackluster demand, compounded by record domestic natural gas storage, continues suppressing Western energy prices despite a small lift in natural gas prices.
The National Climatic Data Center reported that January 2012 was the fourth-warmest January on record in the continental United States and the warmest the month has been since 2006. The agency's record-keeping dates to 1895. Traders and analysts still expect a temperature plunge in Chicago or New York could spur heating demand before winter's end.
In a Friday market summary, Barclays Capital analysts said they expect the cold-weather forecast through Feb. 15 to be transitory and it "should not change the expectation that February will be a largely warm month. Clearly, the storage overhang will be difficult to work off with this kind of weather expectations."
Peak use on the Cal-ISO grid reached the week's high of 29,945 MW Tuesday evening. The grid operator's forecast shows peak use should remain less than 29,925 MW through Feb. 14. Meanwhile, demand within the Northwest Power Pool reached 56,722 MW Monday, the week's high, and tapered off significantly as the week progressed.
Gains in Western natural gas prices were negligible. Malin posted an average price of $2.59/MMBtu Friday, up 3 cents compared with Feb. 3. PG&E CityGate pricing was flat. The Henry Hub spot average gained 10 cents since last Friday, ending at $2.50/MMBtu.
Market observers continue to look for natural gas production cuts after several North American producers announced plans to cut production based on lower prices. Although "output cuts could help stem the price declines, only a burst of frigid temperatures or rising industrial demand will set prices on a higher course," Enerfax stated in a Feb. 10 report.
Working gas in storage reached 2,888 Bcf as of Friday, Feb. 3, according to U.S. Energy Information Administration estimates, a net decrease of 78 Bcf from the previous week. Stocks were 714 Bcf above levels last year at this time and 714 Bcf above the five-year average.
The average price in 2011 for Henry Hub natural gas was $4/MMBtu. In its Short-Term Energy Outlook published Feb. 7, the EIA lowered its forecast for 2012 average Henry Hub prices, to $3.35/MMBtu, down 18 cents compared with the agency's January forecast. The agency still expects prices above $4/MMBtu for 2013.
Since Feb. 3, peak-power prices in the West remained relatively static with California hubs losing a dollar or two and trading slightly south of $30/MWh. Northwest peak prices have remained flat, with the California-Oregon Border and Mid-C trading respectively around $25 and $26/MWh. Palo Verde peak also is at this level.
What's ahead: California-based National Weather Service meteorologists failed to deliver a definitive forecast beyond Monday. One noted that the long-range forecast was "pretty much a disaster," with four different forecast models for the state, which range from dry to very wet. Portland expects temperatures around the 50-degree mark into Thursday, with Seattle forecast to have similar weather for that same period [Linda Dailey Paulson].
* Prices represent both day-ahead locational marginal prices (financial swaps, or EZ Gen DA LMPs) and quasi-swap prices (EZ Gen) as reported by ICE.
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