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Western Price Survey

Week's End Edition
December 16, 2011
Natural Gas Prices Go Into Freefall

Robust storage and moderate temperatures continue to exert downward pressure on natural gas prices.

"In the near term, there appears to be no bottom for the front contract price as it continues to fall on weak seasonal heating demand despite the lower-than-expected weekly storage changes over the past few weeks," said Shiyang Wang, Barclays Capital natural gas analyst, in a Dec. 13 research report.

Henry Hub futures hit a 27-month low Dec. 16 at $3.084/MMBtu, but at the end of the day closed at $3.13. Henry Hub spot traded for an average of $3, down from $3.28/MMBtu the previous Friday. In the West, both Permian Basin and San Juan gas slipped below the $3 mark, though other Western hubs were priced a bit higher (see chart).

Several natural gas pipelines suffered supply disruptions this week, including the Ruby pipeline, which runs to Malin. Following a fire at a Utah compressor station, flows on Ruby-Malin stopped Dec. 11; the pipeline should return to service sometime between Dec. 17 and Dec. 21.

In its weekly natural gas report, the U.S. Energy Information Administration stated that pipeline disruptions actually may have cause natural gas prices to fall, as produced natural gas had difficulty entering the pipeline grid. However, "Price changes as a direct result of the pipeline outages are difficult to isolate in general," the EIA stated, and "warmer-than-normal weather near the end of the report week also likely contributed to the overall drop in prices."

Working gas in storage was 3,729 Bcf as of Dec. 9, according to EIA estimates, a net decrease of 102 Bcf from the previous week. Stocks were 154 Bcf more than last year at this time and 347 Bcf above the five-year average of 3,382 Bcf. The Western region drew 24 Bcf from stores, according to the EIA -- the first withdrawal in three weeks. The agency expects withdrawals to continue in the West until Ruby pipeline operations resume.

In the Friday-to-Friday trading period from Dec. 9 to Dec. 16, here's how average peak-power prices fared:

  • Mid-C: Dropped $4.40 to about $30.90/MWh.
  • California-Oregon Border: Lost about $3.40 to almost $33.60/MWh.
  • NP15: Traded Friday at $34/MWh; posted no trades the previous Friday.
  • SP15: Down $2 to end at $32.65/MWh.
  • Palo Verde: Lost around $1.85 to $31.85/MWh.

Nighttime average prices at Western hubs were mixed, with only Palo Verde gaining about a quarter over the trading period. Northwestern hubs lost around $3/MWh. Average off-peak prices by Friday ranged from about $27 to $29.25/MWh (see chart).

Peak energy use on the Cal-ISO grid reached 33,083 MW Monday evening, which was the week's high. The next uptick in demand is expected Dec. 19 when use should be around 32,600 MW, according to the grid operator.

What's ahead: Seattle temperatures appear likely to stick at 44 °F Monday through Thursday, while Portland should stay in the 40s for that same period. Meanwhile, a high-pressure system will keep California's coast dry. San Francisco should be sunny and clear with temperatures in the high 50s throughout the week. The greater Los Angeles-area forecast is unsettled, with breezy conditions and temperatures at or below seasonal norms into Thursday, Dec. 22 [Linda Dailey Paulson].

Western Electricity Prices
Week's End: December 12 - 16, 2011
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 19.32-999.99 20.22-336.32
Mid-Columbia 30.25-38.75 27.75-36
COB 32.75-41.25 29.25-36
NP 15* 34-37.50 24.50-27.25
SP 15* 31-36.50 23.50-27.25
Palo Verde 29.75-35 22.50-28.50

* 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.

The Western Price Survey is excerpted from Energy NewsData's comprehensive regional news services. See for yourself how NewsData reporters put events in an accurate and meaningful context -- request a sample of either or both California Energy Markets and Clearing Up.

Please contact with questions or comments about this site.

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

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