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Western Price Survey

Week's End Edition
December 22, 2011
Cheap Natural Gas for Santa's Sleigh

While the current La Niña event favors below-normal temperatures across most of the northern and western United States, energy traders are waiting for colder weather in the East to bid up natural gas values. Forecasters say that won't happen anytime soon, leading to speculation from energy analysts that natural gas futures could fall below the $3/MMBtu mark.

So far the heating season across major U.S. energy demand centers has been mild as atmospheric conditions keep cold weather outside the East, according to WSI, a private forecasting firm. From the perspective of gas demand, WSI stated in a Dec. 20 release that it expects January through March to be the mildest nationally since 2006, with a 5.4 percent reduction in heating demand expected compared to last winter.

Henry Hub futures posted a 27-month low Dec. 16 and closed Dec. 21 at $3.19/MMBtu, up just 6 cents from the previous Wednesday. Futures prices have eroded 12 percent in December and have lost 37 percent since June, according to Enerfax.

Barclays Capital analyst Michael Zenker said in a report that futures are still wobbly as the market attempts to balance weather with demand. He added that if milder weather holds, "Santa can go to his red flip-flops during the North American part of his tour."

Thursday's modest withdrawal of natural gas from storage, along with the low-energy demand picture over the Christmas holiday, is likely to send energy prices lower overall. Working gas in storage was 3,629 Bcf as of Dec. 16, according to EIA estimates, a net decrease of 100 Bcf from the previous week.

Overall natural gas stocks remain 6.9 percent above last year's levels and 11.9 percent above the five-year average. The West withdrew 23 Bcf during the report week but inventories are also substantially above historical markers.

As for spot natural gas values, SoCal Border fell 19 cents since last Wednesday to average $3.36/MMBtu on Dec. 21. Further north, Malin gas tumbled 24 cents to $3.26 over the same period. Both hubs, however, regained a little ground in Thursday trading.

As one might expect, power values have found little price support. In the Wednesday-to-Wednesday trading period from Dec. 14 to Dec. 21, here's how average peak-power prices fared:

  • Mid-C: Dropped about $7.90 to $27.45/MWh.
  • California-Oregon Border: Plunged about $8.80 to almost $28.45/MWh.
  • NP15: Lost roughly $6.10 to $29.90/MWh.
  • SP15: Down $6 to about $28.85/MWh.
  • Palo Verde: Lost $2.20 to $30.10/MWh.

Power prices traded Wednesday were for delivery Friday and Saturday (Christmas Eve). In Thursday trading, SP-15 peak gained more than $2 over Wednesday's average and COB peak gained $1.25.

Barclays' Zenker said in a note that natural gas futures for January posted a one-cent gain Thursday -- "the first trade day in some time where prices recovered from a bearish storage report." He also noted that weather reports are now featuring the onset of a cold front starting in the Pacific Northwest in the 11-15 day outlook. "This is the first colder weather in the forecast, other than the current chilly temperatures hovering over New Mexico and Texas," Zenker said [Linda Dailey Paulson].

Editor's Note: This will be the only Western Price Survey report this week. Energy NewsData's offices are closed the week of December 26 - 30.

Western Electricity Prices
December 19 - 22, 2011
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 16.47-40.29 18.14-31.56
Mid-Columbia 25.80-33.50 24.75-30.75
COB 28.10-31.15 26.25-31
NP 15* 29.75-32.25 25.25-25.25
SP 15* 28.35-31.50 22-26.50
Palo Verde 29-32 22-26

* 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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