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Western Price Survey

Week's End Edition
March 2, 2012
Natural Gas Prices Have Nowhere to Go but Down

Natural gas prices keep falling and market observers have no expectation the situation will change as the winter heating season draws to a close.

Working gas in storage reached 2,513 Bcf as of Friday, Feb. 17, according to U.S. Energy Information Administration estimates, a net decrease of 82 Bcf from the previous week. Inventories, which are 43 percent above levels last year and 45 percent above the five-year average, broke records for this time of year, according to Enerfax.

Over the Friday-to-Friday trading period, the Henry Hub spot average price lost 23 cents to $2.37/MMBtu. Southern California Border lost 31 cents to $2.37/MMBtu; Malin and Ruby-Malin dropped 30 cents to $2.28.

Traders had hoped unexpected cuts in nationwide nuclear generation -- including an ongoing outage at San Onofre Nuclear Generating Station Unit No. 3 following a steam-generator leak -- would increase natural gas demand. Total nuclear outages are about 6,500 MW above normal for this time of year, reports Reuters, a level that should add more than 1 Bcf to daily gas demand. But those outages have failed to move natural gas futures. So have displacement of coal with natural gas and curtailments of natural gas production by numerous drilling companies.

"Market participants are growing anxious about the likelihood that storage ratchets could flush a significant amount of gas into the market, thus crushing cash prices at certain locations and possibly generating system-wide cash weakness," noted Barclays analysts in a March 1 research note.

They added that "the extremely warm weather forecast for the majority of March has pulverized the hope that inventory will end March at a relatively normal level, as storage ratchet-related anxieties may have escalated."

Western electricity prices followed natural gas lower over the Friday-to-Friday period. Mid-Columbia and California-Oregon Border average prices each dropped more than $5 and finished around $22 to $24/MWh. South of Path 15 fell $2.36 to $26.47/MWh.

Meanwhile, average nighttime prices in the West dropped between $1.75 and $3.25, ending in a range of $20 to $21.50/MWh.

Demand within the Northwest Power Pool reached what should prove the trading week's high of 57,577 MW, recorded Tuesday, Feb. 28. Peak use on the Cal-ISO grid reached the week's high of 30,627 MW Tuesday evening.

What's ahead: After a possibility of light showers in the greater San Francisco area late Monday, lasting into Tuesday night, conditions may clear. Los Angeles expects clear skies and a high of 71 °F Monday, dropping about 10 degrees the following day. That band of showers may reach Southern California; however, forecasters are uncertain about weather conditions in the state from Tuesday through Thursday, as models have failed to show any consensus. There may be some showers Monday through Thursday in the Pacific Northwest. Seattle temperatures should hover around the 50-degree mark, while Portland should have temperatures in the mid-40s through Thursday [Linda Dailey Paulson].


Western Electricity Prices
Week's End: February 27 - March 2, 2012
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 19.42-919.06 15.40-232.70
Mid-Columbia 20.75-29 19-26.50
COB 22.50-29.50 19-26
NP 15* 26.75-27.75 n/a-n/a
SP 15* 25.25-30.25 19-22
Palo Verde 24-27.60 18-21

* 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.

Archives of the Western Price Survey for the past year are also available online.


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Contact Chris Raphael, editor with questions regarding Price Survey Content.

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