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Western Price Survey

Week's End Edition
December 9, 2011
Analysts Predict Lower Natural Gas Prices Next Year

Signs of colder weather temporarily warmed domestic natural gas prices this week, although record high supplies continue suppressing prices.

Natural gas prices typically move higher as winter weather boosts heating demand; however, at least two investment banks and the U.S. Energy Information Administration lowered their 2012 natural gas price projections this week.

Goldman Sachs cut its projected 2012 natural gas forecast to $3.70/MMBtu from $4.25/MMBtu, based on expectations of strong shale production in the year ahead, Enerfax reported, while Raymond James lowered its forecast to $3.50/Mcf from $4/Mcf -- based on the inability of demand to make a dent in already abundant domestic supplies.

The EIA, in its Short Term Energy Outlook released this week, said it expects Henry Hub spot prices to fall next year to an average of $3.70/MMBtu. The new forecast is 43 cents lower than its November estimate.

Working gas in storage was 3,831 Bcf as of Friday, Dec. 2, according to EIA estimates, a net decrease of 20 Bcf from the previous week. Stocks were 102 Bcf more than last year at this time and 307 Bcf above the five-year average of 3,524 Bcf.

The agency reported that production was off this week, the result of the first shut-in natural gas wells of the season in the San Juan Basin. Production in that region was down Monday, Dec. 5 by 400 MMcf, according to the agency, but full operations reportedly resumed Tuesday.

Western natural gas prices were mixed in the Dec. 2 to Dec. 9 trading period. Only Southern California Border gas gained ground, rising 6 cents to $3.56/MMBtu. PG&E CityGate lost 20 cents, ending at $3.64, and Malin lost 3 cents, ending at $3.46. For comparison, Henry Hub traded for an average of $3.28/MMBtu Friday, Dec. 9, down from $3.33 the previous Friday.

Here's how average peak-power prices fared over the trading period:

  • Mid-C: Gained almost $2.25 to $35.30/MWh.
  • California-Oregon Border: Up about $2.20 to $37/MWh.
  • NP15: Last traded Wednesday at about $38.05/MWh, up almost $1.55 compared to the previous Wednesday.
  • SP15: Rose about 30 cents to end at $34.65/MWh.
  • Palo Verde: Lost around $1.30, trading Friday at roughly $33.70/MWh.

What's ahead: Seattle temperatures should stay in the 30s, jumping to the mid-40s Thursday, with cloudy skies expected throughout the week. Portland temperatures will be similar, with typical December weather predicted for the week. Cloudy conditions will persist in San Francisco from Monday into Thursday. Some rain is possible in the region Wednesday or Thursday, maybe lingering into Friday. Los Angeles high temperatures, after basking in the 70s this week, should fall to the 60s next week [Linda Dailey Paulson].


Western Electricity Prices
Week's End: December 5 - 9, 2011
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 20.77-312.60 15.14-36.65
Mid-Columbia 33.80-40.25 28-39
COB 36.75-41.25 30-38.50
NP 15* 36-38.25 27-30
SP 15* 33.25-37 26-28.90
Palo Verde 32-36.50 25-30

* 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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