Western Price Survey
Week's End Edition
It's no secret that rising crude-oil prices and a lower U.S. dollar have lifted natural gas and electricity values onto higher ground this year. For the past few weeks, it appears the inverse has been happening.
The U.S. Energy Information Administration, in a short-term energy outlook issued Thursday, pointed out the spot price of West Texas Intermediate crude jumped from $122 per barrel in early June to $145 on July 3 -- "in part because of perceptions of tenuous supply in several of the major exporting countries." Oil prices began returning in August to around $120/barrel; this week they fell to $113 for light, sweet crude on lower consumption.
In the West this week, most natural gas prices fell along with oil. Electricity demand, which gained a few thousand MWs to top out at a bit above 44,000 MW Thursday, didn't seem to hold much sway over daytime power values. Off-peak prices, however, seemed to follow increased electricity use, with demand rising by 2,000 MW or so in early-morning hours.
Electricity prices at North of Path 15 and South of Path 15 have moved with near-perfect synchronicity. Average daytime power at both hubs steadily lost $4 throughout the week, bottoming out at $82/MWh, while off-peak prices picked up around $9 over the five-day period and went for around $66/MWh Friday.
Palo Verde peak power dropped $2 Monday through Wednesday and saw another $5 disappear by Friday to $76.52. Nighttime deliveries stayed around $50/MWh most of the week before Friday's gain of $6.
Mid-Columbia peak power prices hardly budged, trading tightly around $77/MWh most of the week. All the action was in off-prime power, which surged $10 from Thursday to $70.32.
The EIA, in its energy outlook, predicted oil prices to average $119/barrel this year and $124 in 2009. The agency noted that the decline in U.S. oil consumption in the first half of the year, 800,000 barrels, was the largest in the last 26 years. But despite U.S. consumers garaging their SUVs and busing to work, global oil demand still grew by 500,000 barrels during the year's first six months.
More importantly for electricity prices, the EIA predicted the Henry Hub natural gas spot price, which averaged $7.17/Mcf in 2007, is on track to exceed $10 this year. And gas prices won't be returning to 2007 levels anytime soon: the EIA predicted they would average $9 in 2009 [Chris Raphael].
Falling Oil, Rising Dollar, Passing Storms = Cheap Natural Gas
Gas prices this week had a perfect non-storm.
According to the U.S. Energy Information Administration, natural gas spot prices since Wednesday fell at all markets in the lower 48 states, with losses ranging between 20 cents and 77 cents/MMBtu. And the key Henry Hub benchmark dropped to its lowest level since February -- $8.11.
The EIA attributed the price drop to multiple factors. Gulf of Mexico natural gas production resumed in the wake of Tropical Storm Edouard, which at its most threatening shut in 154 platforms and nine rigs. Most notably, the Independence Hub, the nation's largest offshore natural gas processing facility, began ramping up for production Friday.
Crude-oil prices have also fallen steadily this week while the U.S. dollar has strengthened, meaning investors have been pulling out of commodities such as natural gas.
Storage rose 50 Bcf last week -- a jump that everyone expected -- leaving natural gas stocks at 2.56 Tcf, 11 percent below year-ago storage and just 0.2 percent shy of the five-year average. The West gained 4 Bcf and storage was 12.7 percent below last year's levels.
The only hub this week to record an increase in gas prices was Alberta, which gained about 10 cents to $7.13/MMBtu. Not only are weather fundamentals different there, but the Canadian dollar lost this week against U.S. currency.
Overall, according to the EIA, the Henry Hub spot price averaged $11.45/Mcf in July, $1.62 below the average spot price in June. The drop marks the end of consecutive increases in the monthly average price that began in October 2007 [C. R.].
Archives of the Western Price Survey for the past year are also available online.
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