For week ending Sept 13 the gas market was flat relative to the week prior. Spreads between the 12, 24, and 36 month terms were unchanged, so there does not appear to be an advantage to locking in rates greater than 12 months. When the spreads get tighter, it is an indication of low inflation, and an opportunity to go longer when locking in your fixed price. As spreads become wider, it is a reflection of increased volatility, which usually translates in a premium the longer you elect to lock your rate. The possibility of US military involvement in the Middle East continues to exist causing some market uncertainty, however a weak hurricane season and cooler fall temperatures add to low levels of market volatility.
New gas storage levels came out on Sept 12 for the week ending Sept 6. The data showed 3,253 Bcf of gas in the system, up 65 Bcf from the previous week, or up 2%. The prior year’s report ending the same week showed 3,425 Bcf in the system, so the levels have come down 5% vs the comparable period a year ago. The being said, present gas in the system is at around the 5 year average of 3,207 Bcf.
Customers looking for price protection should elect to lock their rates with a 6 month fixed price product. Those customers seeking the flexibility of short term contracts, and being able to participate in the benefits of lower index pricing should elect to go with a variable price product.
The past several weeks has seen gas prices run up, however we did see some relieve after Thursday’s storage report, a decline that continued Friday, for the week ending September 6th..
I have not posted before on the impact of the US Energy Information Administration (“EIA”) storage numbers that come out every Thursday at 10:30 am eastern time, and more often than not has an immediate impact on the market be that up or down. The EIA reports the amount of natural gas storage in the US system each week, and is a measure of the amount of gas supply that is able to meet the demands of consumers across the US. Analysts make their estimates of what that storage number will be. When the actual figures come in, the market reacts to those storage levels being over or under the market expectations, largely determined by those same analyst estimates. The inventory levels of gas are measured in billion cubic feet (“Bcf”). The levels are always reported as of the prior week’s storage levels. The data reported on 9/5/2013 showed 3,188 Bcf, up 58 Bcf from the previous week, or up 2%. The prior year’s report ending the same week showed 3,398 Bcf in the system, so the levels have come down 7% vs the comparable period a year ago. The being said, present gas in the system is at around the 5 year average of 3,145 Bcf.
Political turmoil in the Middle East, threat of the US going to war, and the active period of the hurricane season can all lead to volatility in the coming months. Winter season and colder weather also presents a risk of increased volatility in the power and gas markets. Those customers looking for price protection should elect to lock their rates with a 6 month fixed price product. Those customers seeking the flexibility of short term contracts, and being able to participate in the benefits of lower index pricing should elect to go with a variable price product.
Arizona Commissioner to Hold Stakeholder Meetings on Retail Choice Topics
September 3, 2013
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Arizona Corporation Commissioner Brenda Burns informed her colleagues that she will hold a series of meetings with stakeholders regarding specific topics in the Commission's retail electric choice investigation, stating there is, "a great deal more information to acquire, research, study and discern in order to assist me in my full consideration of the Retail Competition matter."
"As many have noted, the decision on whether or not to pursue Retail Competition in Arizona is one of the most, if not, 'the most' important decision to face the Commission in more than a decade. I have appreciated the fervor and passion displayed by both sides of this crucial question and I have learned a great deal from both the advocates and opponents of the proposal to pursue this venture," Burns said.
"However, I feel that I still have a great deal more information to acquire, research, study and discern in order to assist me in my full consideration of the Retail Competition matter," Burns said.
"There are some distinct issues that I wish to delve into on a deeper scale. I will be inviting several key stakeholders to the Commission to discuss and deliberate these separate topics so that I can weigh the disparate arguments and ask questions of both sides. I trust that all of you share my concerns and frustrations with the limited way we can discuss and weigh the conflicting volume of evidence as it has been presented to us for the better part of this year," Burns said.
"These discussions will be noticed and anyone who wants to attend in order to listen and observe is welcome. It is my desire to move in a deliberate, thoughtful and prudent manner towards an informed decision when I/we finally vote on this matter. I anticipate inviting stakeholders to meet throughout the month of September on the various topics and invite you to join me in any or all of these meetings," Burns said.
For week ending Aug 30th, gas markets are trending up for the third week in a row. The 12, 24, and 36 month strips are now approaching the $4.00 mark, slightly above where they were at this time in 2012, and off the hi marks we saw at this time in 2011. The spread between the 12, 24, and 36 month terms are relatively unchanged, so there does not appear to be an advantage for locking into long term fixed price products from a pure price perspective, although short terms locks of 6 months to one year will provide customers with a great deal of price certainty this coming winter season and into next summer for the 12 month product. Variable price products may be lower, but will lack the protection of a fixed price product to protect against cold weather related effects on natural gas demand in the winter season.