By CHRIS KAHN (AP) – 8 hours ago
NEW YORK — Natural gas prices have dropped by more than 12 percent in the past month as the country continues to sip at its energy reserves and a balmy November allowed homeowners to leave the heat off.
Retail prices for natural gas, or what many consumers will pay to heat their homes, are expected to be substantially lower this year.
Spot prices for natural gas have dropped to almost half of what they were last year, though they've increased slightly this month, according to the Energy Information Administration.
The recession has kept natural gas demand low most of the year. With manufacturers shuttering factories and closing offices, the country is using less electricity and power plants are burning less natural gas.
Analyst Stephen Schork noted that with industrial production still weak, home heating would be the primary source of natural gas demand for the rest of the year.
"What does that say about the current recovery, or lack thereof?" Schork said in a research note.
The U.S. has added more natural gas into storage every week since March 27, and there is now more natural gas tucked away in the U.S. than at any point in history. Storage houses are crammed beyond their listed capacity in the West on the Gulf of Mexico, and they're nearing capacity elsewhere, according to data from the Department of Energy.
With so much in storage, natural gas futures prices have plunged on the New York Mercantile Exchange. The December contract fell from $5.045 to $4.424 per 1,000 cubic feet between Oct. 30 to Friday.
Benchmark crude also dropped Friday, giving up 74 cents to settle at $76.72 a barrel on the last trading day for the December contract. Crude prices for January delivery lost 58 cents to settle at $77.47.
At the pump, retail gas prices increased for the third straight day, adding less than a penny overnight to a new national average of $2.642 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 4.6 cents more expensive than last month and 62.2 cents more expensive than the same time last year, when prices were in free fall.
In other Nymex trading, heating oil fell 2.08 cents to settle at $1.9756 a gallon. Gasoline for December delivery added 1.11 cents to settle at $1.9806 a gallon. Natural gas added 8.2 cents to settle at 4.424 cents per 1,000 cubic feet.
In London, Brent crude for December delivery fell 42 cents to $77.22 on the ICE Futures exchange.
Associated Press Writers Barry Hatton in Portugal and Alex Kennedy in Singapore contributed to this report.
Copyright © 2009 The Associated Press. All rights reserved.
Saturday, November 21, 2009
Friday, November 20, 2009
Natural Gas Pipeline Probe Underway
By Tom Doggett
WASHINGTON, Nov 19 (Reuters) - The U.S. Federal Energy Regulatory Commission said on Thursday it was investigating whether three interstate natural gas pipelines are overcharging their customers.
The agency said it is looking at rates charged by privately held MidAmerican Energy Holdings Co's Northern Natural Gas Company, TransCanada Corp's (TRP.TO) Great Lakes Gas Transmission LP and Natural Gas Pipeline Company of America LLC, which is operated by privately held Kinder Morgan Inc.
FERC said the probe concerns whether the companies "are over-recovering costs, causing rates to be unjust and unreasonable."
"Protecting consumers against unjust and unreasonable rates is a fundamental responsibility of the commission," FERC Chairman Jon Wellinghoff said.
The rates allowed the pipelines to earn returns ranging from nearly 21 percent to almost 25 percent, higher than what FERC allows.
The commission ordered the investigation after FERC staff reviewed data submitted by the pipelines on their cost-of-service and revenue information.
The commission never approves rates of return above 20 percent, an agency spokeswoman said. The American Public Gas Association (APGA) said the normal return for pipelines is about 12 percent.
The APGA, which represents public gas systems, praised the FERC's crackdown on the pipelines.
"There is no public interest served in allowing pipelines to keep billions of dollars of consumer's money, especially in the current economic climate," the trade group said.
FERC ordered an administrative law judge to convene within 30 days a prehearing conference to clarify the positions of the pipeline companies and the agency and consider any procedural issues and discovery dates necessary for the hearing.
FERC said the alleged higher rates of return were as follows:
* Northern Natural Gas' 15,141-mile system extends from the Permian Basin in Texas to the upper Midwest. FERC staff calculated Northern's total adjusted 2008 revenue to be $726 million, which appears to yield an estimated earned return on equity of 24.36 percent.
* Great Lakes' 2,100-mile system transports natural gas through Minnesota, Wisconsin and Michigan. FERC staff calculated Great Lakes' total adjusted 2008 revenue to be $290 million, which appears to yield an estimated earned return of 20.83 percent.
* Natural Gas Pipeline's 9,700-mile system consists primarily of two interconnected transmission pipelines, the Amarillo and Gulf Coast lines, which terminate in Chicago. FERC staff calculated Natural Gas' total adjusted 2008 revenue to be $656 million, which appears to yield an estimated earned return of 24.5 percent.
FERC also said Natural Gas Pipeline appears to be over-recovering fuel and lost and unaccounted for gas from its customers.
FERC said its staff calculated an over-recovery of 30.9 million dekatherms of gas.
"Natural's reports also show that for the fourth quarter of 2008 and the first quarter of 2009, it received $59.6 million and $48.7 million, respectively, in revenues from the sale of excess gas," the agency said. (Reporting by Tom Doggett; Editing by David Gregorio)
WASHINGTON, Nov 19 (Reuters) - The U.S. Federal Energy Regulatory Commission said on Thursday it was investigating whether three interstate natural gas pipelines are overcharging their customers.
The agency said it is looking at rates charged by privately held MidAmerican Energy Holdings Co's Northern Natural Gas Company, TransCanada Corp's (TRP.TO) Great Lakes Gas Transmission LP and Natural Gas Pipeline Company of America LLC, which is operated by privately held Kinder Morgan Inc.
FERC said the probe concerns whether the companies "are over-recovering costs, causing rates to be unjust and unreasonable."
"Protecting consumers against unjust and unreasonable rates is a fundamental responsibility of the commission," FERC Chairman Jon Wellinghoff said.
The rates allowed the pipelines to earn returns ranging from nearly 21 percent to almost 25 percent, higher than what FERC allows.
The commission ordered the investigation after FERC staff reviewed data submitted by the pipelines on their cost-of-service and revenue information.
The commission never approves rates of return above 20 percent, an agency spokeswoman said. The American Public Gas Association (APGA) said the normal return for pipelines is about 12 percent.
The APGA, which represents public gas systems, praised the FERC's crackdown on the pipelines.
"There is no public interest served in allowing pipelines to keep billions of dollars of consumer's money, especially in the current economic climate," the trade group said.
FERC ordered an administrative law judge to convene within 30 days a prehearing conference to clarify the positions of the pipeline companies and the agency and consider any procedural issues and discovery dates necessary for the hearing.
FERC said the alleged higher rates of return were as follows:
* Northern Natural Gas' 15,141-mile system extends from the Permian Basin in Texas to the upper Midwest. FERC staff calculated Northern's total adjusted 2008 revenue to be $726 million, which appears to yield an estimated earned return on equity of 24.36 percent.
* Great Lakes' 2,100-mile system transports natural gas through Minnesota, Wisconsin and Michigan. FERC staff calculated Great Lakes' total adjusted 2008 revenue to be $290 million, which appears to yield an estimated earned return of 20.83 percent.
* Natural Gas Pipeline's 9,700-mile system consists primarily of two interconnected transmission pipelines, the Amarillo and Gulf Coast lines, which terminate in Chicago. FERC staff calculated Natural Gas' total adjusted 2008 revenue to be $656 million, which appears to yield an estimated earned return of 24.5 percent.
FERC also said Natural Gas Pipeline appears to be over-recovering fuel and lost and unaccounted for gas from its customers.
FERC said its staff calculated an over-recovery of 30.9 million dekatherms of gas.
"Natural's reports also show that for the fourth quarter of 2008 and the first quarter of 2009, it received $59.6 million and $48.7 million, respectively, in revenues from the sale of excess gas," the agency said. (Reporting by Tom Doggett; Editing by David Gregorio)
Thursday, November 19, 2009
December Natural Gas $4.24/MMBtu
By CHRIS KAHN (AP) – 3 hours ago
NEW YORK — Oil prices increased for the third day in a row as the dollar weakened and AAA reported that more drivers are expected on the highways this Thanksgiving weekend.
Benchmark crude for December delivery added 44 cents Wednesday to settle at $79.58 a barrel on the New York Mercantile Exchange. Most of the trading had already passed to the January contract, which rose 38 cents to settle at $80.10 a barrel.
The weak dollar has helped boost oil prices most of the year. Crude prices, which are priced in U.S. currency, tend to rise as the dollar falls and investors holding strong international currencies get more buying power.
AAA also reported Wednesday that 33.2 million people would get in their cars and travel at least 50 miles over the Thanksgiving weekend, next Wednesday through Sunday. That's an increase of 2.1 percent from 2008, even though a gallon of gas is 56 cents more expensive than the same time last year.
AAA, which based its report on a telephone survey, said the increase was a sign that consumers are more confident in the economy.
Meanwhile, the Energy Information Administration reported that the country's stockpile of crude oil fell by 900,000 barrels last week. But the drop was hardly a sign of a recovering economy.
American petroleum consumption has dropped to the lowest level since July 17, and oil companies are importing much less oil as they scale back their refining operations.
"Demand is still very, very weak," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "It's keeping us from sharing in the bullish euphoria that you're seeing in the stock market."
Some analysts expect weak global economic growth to keep commodities like oil from surging much higher. Global growth will likely average 2.5 percent a year during the next three years, about half the rate between 2002 and 2007, said Stephen Roach, Asia Chairman for Morgan Stanley.
"I don't see commodities repeating the boom-like surges," Roach said in Singapore.
At the pump, retail gas prices increased for the first time since Oct. 30, rising less than a penny to $2.632 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 6.8 cents more expensive than last month and 56.4 cents more expensive than the same time last year.
In other Nymex trading, heating oil lost less than a penny to settle at $2.0486 a gallon. Gasoline for December delivery added less than a penny to settle at $2.0114 a gallon. Natural gas for December delivery gave up 27.6 cents to settle at $4.254 per 1,000 cubic feet.
In London, Brent crude for December delivery added 50 cents to settle at $79.47 on the ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.
Copyright © 2009 The Associated Press. All rights reserved.
NEW YORK — Oil prices increased for the third day in a row as the dollar weakened and AAA reported that more drivers are expected on the highways this Thanksgiving weekend.
Benchmark crude for December delivery added 44 cents Wednesday to settle at $79.58 a barrel on the New York Mercantile Exchange. Most of the trading had already passed to the January contract, which rose 38 cents to settle at $80.10 a barrel.
The weak dollar has helped boost oil prices most of the year. Crude prices, which are priced in U.S. currency, tend to rise as the dollar falls and investors holding strong international currencies get more buying power.
AAA also reported Wednesday that 33.2 million people would get in their cars and travel at least 50 miles over the Thanksgiving weekend, next Wednesday through Sunday. That's an increase of 2.1 percent from 2008, even though a gallon of gas is 56 cents more expensive than the same time last year.
AAA, which based its report on a telephone survey, said the increase was a sign that consumers are more confident in the economy.
Meanwhile, the Energy Information Administration reported that the country's stockpile of crude oil fell by 900,000 barrels last week. But the drop was hardly a sign of a recovering economy.
American petroleum consumption has dropped to the lowest level since July 17, and oil companies are importing much less oil as they scale back their refining operations.
"Demand is still very, very weak," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "It's keeping us from sharing in the bullish euphoria that you're seeing in the stock market."
Some analysts expect weak global economic growth to keep commodities like oil from surging much higher. Global growth will likely average 2.5 percent a year during the next three years, about half the rate between 2002 and 2007, said Stephen Roach, Asia Chairman for Morgan Stanley.
"I don't see commodities repeating the boom-like surges," Roach said in Singapore.
At the pump, retail gas prices increased for the first time since Oct. 30, rising less than a penny to $2.632 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 6.8 cents more expensive than last month and 56.4 cents more expensive than the same time last year.
In other Nymex trading, heating oil lost less than a penny to settle at $2.0486 a gallon. Gasoline for December delivery added less than a penny to settle at $2.0114 a gallon. Natural gas for December delivery gave up 27.6 cents to settle at $4.254 per 1,000 cubic feet.
In London, Brent crude for December delivery added 50 cents to settle at $79.47 on the ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.
Copyright © 2009 The Associated Press. All rights reserved.
Wednesday, November 18, 2009
ETF Natural Gas Trading Today
http://www.etftrends.com/2009/11/new-natural-gas-etf-expected-begin-trading-tomorrow.html
November 17, 2009 at 2:00 pm by Tom Lydon
United States Commodity Funds recently won regulatory approval for its newest addition: a 12-month natural gas exchange traded fund (ETF). The fund is expected to begin trading tomorrow.
The U.S. 12 Month Natural Gas Fund (NYSEArca: UNL) has gotten the green light from regulators to issue about 30 million shares, which will purchase natural gas futures for delivery over the next 12 months. Asjylyn Loder for Bloomberg reports that it will sell the near-month contract as it approaches expiration and replace it with a contract for delivery in 12 months.
The ETF comes from U.S. Commodity Funds LLC, which also manages the popular $3.5-billion U.S. Natural Gas Fund (NYSEArca: UNG) and the $1.96-billion U.S. Oil Fund (NYSEArca: USO). (Natural gas ETF shifts strategy).
UNG differs from UNL in that UNG buys the near-month contract, then sells it each month as it nears expiration and buys the next month.
In terms of natural gas prices and futures, what’s the difference between UNG and UNL? UNL can help mitigate some of the impact of contango, which is when the front-month contract is higher priced than the contracts further out. By using the 12-month approach, the impact of contango is, on average, about one-third less than it would be in a fund that simply uses a front-month approach.
Which fund an investor chooses depends on what’s trying to be accomplished. When the markets are in contango, it’s no guarantee that a 12-month fund would do better. On the other hand, it could be beneficial for investors looking to lessen the impact contango can have. On the other hand, if someone is trading frequently and heavily, there might not be as much concern about contango. As the energy markets shift, it could be more advantageous to be in one fund over another – but it’s no guarantee in the volatile energy space. Many have learned that a single hurricane can change conditions rapidly.
Natural gas futures were wavering today. Below-normal temperatures in the Midwest and Northeast are anticipated to boost natural gas demand, but there’s only been modest growth in industrial production, reports Christine Buurma for Dow Jones Newswires. Until today, many traders had been betting that natural gas prices would fall in the coming months.
For more stories about natural gas, visit our natural gas category.
November 17, 2009 at 2:00 pm by Tom Lydon
United States Commodity Funds recently won regulatory approval for its newest addition: a 12-month natural gas exchange traded fund (ETF). The fund is expected to begin trading tomorrow.
The U.S. 12 Month Natural Gas Fund (NYSEArca: UNL) has gotten the green light from regulators to issue about 30 million shares, which will purchase natural gas futures for delivery over the next 12 months. Asjylyn Loder for Bloomberg reports that it will sell the near-month contract as it approaches expiration and replace it with a contract for delivery in 12 months.
The ETF comes from U.S. Commodity Funds LLC, which also manages the popular $3.5-billion U.S. Natural Gas Fund (NYSEArca: UNG) and the $1.96-billion U.S. Oil Fund (NYSEArca: USO). (Natural gas ETF shifts strategy).
UNG differs from UNL in that UNG buys the near-month contract, then sells it each month as it nears expiration and buys the next month.
In terms of natural gas prices and futures, what’s the difference between UNG and UNL? UNL can help mitigate some of the impact of contango, which is when the front-month contract is higher priced than the contracts further out. By using the 12-month approach, the impact of contango is, on average, about one-third less than it would be in a fund that simply uses a front-month approach.
Which fund an investor chooses depends on what’s trying to be accomplished. When the markets are in contango, it’s no guarantee that a 12-month fund would do better. On the other hand, it could be beneficial for investors looking to lessen the impact contango can have. On the other hand, if someone is trading frequently and heavily, there might not be as much concern about contango. As the energy markets shift, it could be more advantageous to be in one fund over another – but it’s no guarantee in the volatile energy space. Many have learned that a single hurricane can change conditions rapidly.
Natural gas futures were wavering today. Below-normal temperatures in the Midwest and Northeast are anticipated to boost natural gas demand, but there’s only been modest growth in industrial production, reports Christine Buurma for Dow Jones Newswires. Until today, many traders had been betting that natural gas prices would fall in the coming months.
For more stories about natural gas, visit our natural gas category.
Tuesday, November 17, 2009
Natural Gas Inventory High on Monday
http://www.ogj.com/index/article-display/6929386134/articles/oil-gas-journal/general-interest-2/economics-markets/2009/11/market-watch__crude2.html
Nov 16, 2009
Sam Fletcher
OGJ Senior Writer
HOUSTON, Nov. 16 -- Energy prices fell in a second consecutive trading session Nov. 13 with crude touching a 1-month low in intraday trade in the New York market following reports of bigger-than-expected increases in US inventories of crude, gasoline, and distillate fuels.
The Energy Information Administration said US commercial benchmark crude inventories increased by 1.8 million bbl to 337.7 million bbl in the week ended Nov. 6, with gasoline stocks up 2.5 million bbl to 210.8 million, and distillate fuel inventories increased 300,000 bbl to 167.7 million bbl, triggering a 3% drop in the Nov. 12 price of crude (OGJ Online, Nov. 13, 2009).
In New Orleans, analysts at Pritchard Capital Partners LLC said, “Crude oil held the $75[/bbl] level in Friday’s trade, but early gains were reversed due to a lower consumer confidence reading from the University of Michigan and comments from the…ExxonMobil Corp. [Chief Executive Officer] Rex Tillerson that record-high inventories around the globe will not be dented by winter seasonal demand. He added that he saw a ‘disconnect’ between the price of crude and the supply/demand picture for crude.”
Pritchard Capital analysts said, “The counter to Tillerson’s comments are growing demand figures out of China that were highlighted by [the Nov. 13] report that China’s power consumption is up 16% from 2008, and growing murmurs that the International Energy Agency (IEA) is exaggerating future global oil production—one report suggests oil production in 2030 will be closer to 75 million b/d vs. the 105 million b/d estimate.”
Meanwhile, analysts in the Houston office of Raymond James & Associates Inc. reported a rebound in crude prices in early trading Nov. 16 “driven by news…that the world's second-largest economy [China] beat expectations and grew at an annual rate of 4.8% in the third quarter.” They said, “Additionally, a declining dollar and growing speculation that the Organization of Petroleum Exporting Countries will leave production unchanged at its December meeting are helping to fuel crude's rally. Natural gas is also trading slightly higher today as a cold front brings an early-season snowfall to the Central Plains and parts of the Midwest.”
Olivier Jakob at Petromatrix, Zug, Switzerland, said, “The dollar index was pushed down…during the week and as well in overnight trading before the start of this week. There is not much else than the dollar index driving the global markets and not many solutions for the macrotraders than to continue selling the dollar if they want to maintain the positive returns on equities for the end of the year mark. The Nov. 13 close of West Texas Intermediate was the only noticeable outlier deviation to the calculated value based on the eurodollar correlation 2009 model. Based on the correlation model WTI should have been priced at $78/bbl rather than $76.35/bbl, hence it has some catching up to do as the euro tries again this morning to break the resistance of 1.50.”
Jakob also noted, “Peace continues to hold in the Nigerian Delta and over the weekend the managing director of the Nigerian National Petroleum Corp. was quoted in the local press as saying that crude oil production reached 2.4 million b/d Nov. 12. This compares with 1.9 million b/d used by the IEA for the October estimates.”
He advised, “One must always apply some caution to the quoted numbers out of the Nigerian press.” But “one way or another,” Jakob said, “we will see higher output in Nigeria over the next 3 months than over the last 6 months, and with their higher yields for light products these barrels will displace a considerable amount of heavier crude oil from the Middle East. It is not necessarily a coincidence that Saudi Arabia has restarted supplying term contracts to some Asian refiners, as they should face some competition in coming months from the increased Nigerian supplies.”
At KBC Market Services, a division of KBC Process Technology Ltd. in Surrey, UK, analysts said, “The Saudis have reminded us in two ways why they are still major players in world oil markets. First, it was reported that Saudi Arabia will sell more crude oil to certain Asian customers and to major oil companies with global refining operations. In typical style the Saudi’s signal is not glaring; instead it is a subtle indication that they do not want to see oil prices rise too far, too fast, and risk damaging economic recovery. Specialist tanker tracking consultants reported that other OPEC countries have gradually increased shipments, but only to Asia where demand is growing and not to Europe and the US where demand remains very weak. This all means that compliance with OPEC’s 4.2 million b/d of output cuts has fallen to no more than about 63% compared [with] 80% earlier this year. With the benefit of hindsight it now looks as if OPEC’s cuts would have been far too severe had they been implemented. But they have done the job. The news of higher volumes from Saudi Arabia, combined with weak demand numbers from the US, helped send the front month WTI price down to is lowest close for a month on Thursday, albeit still a healthy $76.94/bbl.”
KBC analysts said, “The second way in which the Saudis demonstrated their muscle was when Saudi Aramco’s head of refining revealed…that two new refineries which will each process 400,000 b/d of Arab Heavy crude oil—Jubail, where Total is Aramco’s partner, and Yanbu, where ConocoPhillips is the partner—will go ahead having been postponed a year ago. In the meantime, there were tough negotiations between Saudi Aramco and the majors which yielded reported cost cuts of $2 billion for Jubail and a figure thought to be even higher for Yanbu. The revised project costs are about $10 billion each, still big bucks of course, but the recession has provided an opportunity for sponsors of big projects to force project-hungry bidders to cut their bills.”
At the Center for Global Energy Studies (CGES), London, analysts said, “With the passage of every week, evidence seems to be building that the world economy is now in the recovery room. Not so long ago we were told that US GDP in the third quarter had grown over the previous quarter by more than 3% at an annualized rate. Now we are informed that Chinese industrial production surged by 16% year-on-year in October and rises in the Baltic Dry Index suggest that world trade is picking itself slowly off the floor.”
However, CGES analysts said, “Despite such welcome tidings, the oil industry faces more confusion and uncertainty with the appearance in the news last week of two oil-related items having very different longer-term implications. On the one hand, there was the publication of the IEA's 2009 World Economic Outlook, which frightened everyone with its call for over $10 trillion of additional investments in energy infrastructure and energy-related capital stock to avert catastrophic climate change. On the other, there was the news that Iraq had agreed with a consortium led by Eni SPA to expand output at its giant Zubair oil field. New capacity from this field, when added to additional production from other massive Iraqi fields, means that in 7-10 years Iraq will be able to produce at least 8 million b/d, placing it among the world's largest oil producers, second only to Saudi Arabia in OPEC. We have in these two items the kernel of a severe problem that will surely increase by many notches the existing stresses and strains in the oil business.”
Energy prices
The December contract for benchmark US light, sweet crudes traded as low as $75.57/bbl Nov. 13 on the New York Mercantile Exchange but managed to close at $76.35/bbl, down 59¢ for the day. The January contract dropped 62¢ to $77.03/bbl. On the US spot market, WTI at Cushing, Okla., declined 59¢ to $76.35/bbl. Heating oil for December delivery lost 2.49¢ to $1.97/gal on NYMEX. Reformulated blend stock for oxygenate blending (RBOB) for the same month declined 2.43¢ to $1.92/gal.
The December natural gas contract gained 2.2¢ to $4.39/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., fell 68¢ to $2.52/MMbtu. Natural gas rose in the futures market despite a larger than expected storage injection of 25 bcf vs. an 16 bcf estimate.
“However, the real noise in the natural gas market was the divergence between NYMEX natural gas and the natural gas hubs where the natural gas is sold,” said Pritchard Capital Partners. “According to Bloomberg quotes the main natural gas hubs across the US were down 20-30%. …The divergence in prices between the Hubs and NYMEX could be attributed to the futures rolls of the US Natural Gas Fund. The December front month NYMEX contract expires on Nov. 24, but based on the prices on the hubs it is possible that NYMEX natural gas could trade lower early next week. The low price of the hubs indicates natural gas is approaching full storage as it always does during this period every year.”
In London, the December IPE contract for North Sea Brent crude was down 47¢ to $75.55/bbl. Gas oil for December lost $4.25 to $611/tonne.
The average price for OPEC’s basket of 12 reference crudes dropped 80¢ to $75.26/bbl on Nov. 13. So far this year, OPEC’s basket price has averaged $59.05/bbl.
Contact Sam Fletcher at samf@ogjonline.com.
Nov 16, 2009
Sam Fletcher
OGJ Senior Writer
HOUSTON, Nov. 16 -- Energy prices fell in a second consecutive trading session Nov. 13 with crude touching a 1-month low in intraday trade in the New York market following reports of bigger-than-expected increases in US inventories of crude, gasoline, and distillate fuels.
The Energy Information Administration said US commercial benchmark crude inventories increased by 1.8 million bbl to 337.7 million bbl in the week ended Nov. 6, with gasoline stocks up 2.5 million bbl to 210.8 million, and distillate fuel inventories increased 300,000 bbl to 167.7 million bbl, triggering a 3% drop in the Nov. 12 price of crude (OGJ Online, Nov. 13, 2009).
In New Orleans, analysts at Pritchard Capital Partners LLC said, “Crude oil held the $75[/bbl] level in Friday’s trade, but early gains were reversed due to a lower consumer confidence reading from the University of Michigan and comments from the…ExxonMobil Corp. [Chief Executive Officer] Rex Tillerson that record-high inventories around the globe will not be dented by winter seasonal demand. He added that he saw a ‘disconnect’ between the price of crude and the supply/demand picture for crude.”
Pritchard Capital analysts said, “The counter to Tillerson’s comments are growing demand figures out of China that were highlighted by [the Nov. 13] report that China’s power consumption is up 16% from 2008, and growing murmurs that the International Energy Agency (IEA) is exaggerating future global oil production—one report suggests oil production in 2030 will be closer to 75 million b/d vs. the 105 million b/d estimate.”
Meanwhile, analysts in the Houston office of Raymond James & Associates Inc. reported a rebound in crude prices in early trading Nov. 16 “driven by news…that the world's second-largest economy [China] beat expectations and grew at an annual rate of 4.8% in the third quarter.” They said, “Additionally, a declining dollar and growing speculation that the Organization of Petroleum Exporting Countries will leave production unchanged at its December meeting are helping to fuel crude's rally. Natural gas is also trading slightly higher today as a cold front brings an early-season snowfall to the Central Plains and parts of the Midwest.”
Olivier Jakob at Petromatrix, Zug, Switzerland, said, “The dollar index was pushed down…during the week and as well in overnight trading before the start of this week. There is not much else than the dollar index driving the global markets and not many solutions for the macrotraders than to continue selling the dollar if they want to maintain the positive returns on equities for the end of the year mark. The Nov. 13 close of West Texas Intermediate was the only noticeable outlier deviation to the calculated value based on the eurodollar correlation 2009 model. Based on the correlation model WTI should have been priced at $78/bbl rather than $76.35/bbl, hence it has some catching up to do as the euro tries again this morning to break the resistance of 1.50.”
Jakob also noted, “Peace continues to hold in the Nigerian Delta and over the weekend the managing director of the Nigerian National Petroleum Corp. was quoted in the local press as saying that crude oil production reached 2.4 million b/d Nov. 12. This compares with 1.9 million b/d used by the IEA for the October estimates.”
He advised, “One must always apply some caution to the quoted numbers out of the Nigerian press.” But “one way or another,” Jakob said, “we will see higher output in Nigeria over the next 3 months than over the last 6 months, and with their higher yields for light products these barrels will displace a considerable amount of heavier crude oil from the Middle East. It is not necessarily a coincidence that Saudi Arabia has restarted supplying term contracts to some Asian refiners, as they should face some competition in coming months from the increased Nigerian supplies.”
At KBC Market Services, a division of KBC Process Technology Ltd. in Surrey, UK, analysts said, “The Saudis have reminded us in two ways why they are still major players in world oil markets. First, it was reported that Saudi Arabia will sell more crude oil to certain Asian customers and to major oil companies with global refining operations. In typical style the Saudi’s signal is not glaring; instead it is a subtle indication that they do not want to see oil prices rise too far, too fast, and risk damaging economic recovery. Specialist tanker tracking consultants reported that other OPEC countries have gradually increased shipments, but only to Asia where demand is growing and not to Europe and the US where demand remains very weak. This all means that compliance with OPEC’s 4.2 million b/d of output cuts has fallen to no more than about 63% compared [with] 80% earlier this year. With the benefit of hindsight it now looks as if OPEC’s cuts would have been far too severe had they been implemented. But they have done the job. The news of higher volumes from Saudi Arabia, combined with weak demand numbers from the US, helped send the front month WTI price down to is lowest close for a month on Thursday, albeit still a healthy $76.94/bbl.”
KBC analysts said, “The second way in which the Saudis demonstrated their muscle was when Saudi Aramco’s head of refining revealed…that two new refineries which will each process 400,000 b/d of Arab Heavy crude oil—Jubail, where Total is Aramco’s partner, and Yanbu, where ConocoPhillips is the partner—will go ahead having been postponed a year ago. In the meantime, there were tough negotiations between Saudi Aramco and the majors which yielded reported cost cuts of $2 billion for Jubail and a figure thought to be even higher for Yanbu. The revised project costs are about $10 billion each, still big bucks of course, but the recession has provided an opportunity for sponsors of big projects to force project-hungry bidders to cut their bills.”
At the Center for Global Energy Studies (CGES), London, analysts said, “With the passage of every week, evidence seems to be building that the world economy is now in the recovery room. Not so long ago we were told that US GDP in the third quarter had grown over the previous quarter by more than 3% at an annualized rate. Now we are informed that Chinese industrial production surged by 16% year-on-year in October and rises in the Baltic Dry Index suggest that world trade is picking itself slowly off the floor.”
However, CGES analysts said, “Despite such welcome tidings, the oil industry faces more confusion and uncertainty with the appearance in the news last week of two oil-related items having very different longer-term implications. On the one hand, there was the publication of the IEA's 2009 World Economic Outlook, which frightened everyone with its call for over $10 trillion of additional investments in energy infrastructure and energy-related capital stock to avert catastrophic climate change. On the other, there was the news that Iraq had agreed with a consortium led by Eni SPA to expand output at its giant Zubair oil field. New capacity from this field, when added to additional production from other massive Iraqi fields, means that in 7-10 years Iraq will be able to produce at least 8 million b/d, placing it among the world's largest oil producers, second only to Saudi Arabia in OPEC. We have in these two items the kernel of a severe problem that will surely increase by many notches the existing stresses and strains in the oil business.”
Energy prices
The December contract for benchmark US light, sweet crudes traded as low as $75.57/bbl Nov. 13 on the New York Mercantile Exchange but managed to close at $76.35/bbl, down 59¢ for the day. The January contract dropped 62¢ to $77.03/bbl. On the US spot market, WTI at Cushing, Okla., declined 59¢ to $76.35/bbl. Heating oil for December delivery lost 2.49¢ to $1.97/gal on NYMEX. Reformulated blend stock for oxygenate blending (RBOB) for the same month declined 2.43¢ to $1.92/gal.
The December natural gas contract gained 2.2¢ to $4.39/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., fell 68¢ to $2.52/MMbtu. Natural gas rose in the futures market despite a larger than expected storage injection of 25 bcf vs. an 16 bcf estimate.
“However, the real noise in the natural gas market was the divergence between NYMEX natural gas and the natural gas hubs where the natural gas is sold,” said Pritchard Capital Partners. “According to Bloomberg quotes the main natural gas hubs across the US were down 20-30%. …The divergence in prices between the Hubs and NYMEX could be attributed to the futures rolls of the US Natural Gas Fund. The December front month NYMEX contract expires on Nov. 24, but based on the prices on the hubs it is possible that NYMEX natural gas could trade lower early next week. The low price of the hubs indicates natural gas is approaching full storage as it always does during this period every year.”
In London, the December IPE contract for North Sea Brent crude was down 47¢ to $75.55/bbl. Gas oil for December lost $4.25 to $611/tonne.
The average price for OPEC’s basket of 12 reference crudes dropped 80¢ to $75.26/bbl on Nov. 13. So far this year, OPEC’s basket price has averaged $59.05/bbl.
Contact Sam Fletcher at samf@ogjonline.com.
Monday, November 16, 2009
Capture Versus Flaring Natural Gas
By JAMES MacPHERSON (AP) – 5 hours ago
BISMARCK, N.D. — The burning glow over North Dakota's oil patch is slowly dimming as companies work to capture and sell natural gas instead of flaring it.
Though the flares atop the oil fields have lessened in recent months, it's still tough to stomach for those in North Dakota who question rising heating bills in the light of the huge hissing flames that burn natural gas as waste.
"I've heard comments here and there that it's too bad all that gas is going to waste," said Greg Armitage, who runs the Hilltop Home of Comfort nursing home in Killdeer, a western North Dakota town of about 700 in the heart of the state's oil fields.
A year ago, almost one-third of natural gas that came to the surface in North Dakota went up in smoke as an unmarketable byproduct of oil production. The 26 billion cubic feet of natural gas that billowed flames and smoke from scores of oil wells was about twice the annual gas consumption of the state.
More than $350 million in infrastructure improvements are either planned or under way in North Dakota to capture natural gas and move it to market, said Justin Kringstad, director of the state Pipeline Authority.
"It's being captured for economic reasons as well as for the environment," Kringstad said. "There are several things pushing these investments and each is equally important."
State and industry officials say the amount of gas flared has decreased from 25 percent of total production to 11 percent in the past few months as the capacity has increased at processing plants in the state and as pipelines are being built.
Wayde Schafer, a North Dakota spokesman for the Sierra Club, said any level of wasted energy is unacceptable.
"It was absolutely horrible," Schafer said of the amount of natural gas flared in 2008. "Now it's just terribly horrible.
"I think it's pretty hard to justify wasting a fuel source," Schafer said. "We're still getting the pollution without the benefit of the energy."
Flaring natural gas creates carbon dioxide emissions blamed for global warming.
Jim Semerad, manager of permitting and compliance for the state Health Department, said the flare emissions in the state's oil patch are within acceptable air quality guidelines. Still, he said, "just because they meet air quality standards doesn't mean we're happy with the wasted fuel."
Beyond air quality standards, there are no laws to discourage flaring in North Dakota, he said.
"The waste issue is off our regulatory ability," Semerad said. "We can't mandate it."
The U.S. Energy Department's Energy Information Administration says less than 1 percent of natural gas is flared from oil fields nationwide, and less than 3 percent worldwide.
"The goal is to get North Dakota down to the national average, or lower," Kringstad said. He's not sure when that might happen.
"The challenge is keeping up with new wells coming on line," Kringstad said.
The problem of unwanted natural gas comes from the success of the state's oil patch, which government scientists say is home to the largest continuous crude accumulation they've assessed. Improved horizontal drilling technology in the rich Bakken shale and Three Forks-Sanish formations has led to record crude production in the state, elevating it to the fourth-largest oil-producing state in the nation, leapfrogging from ninth since 2006.
Ron Ness, president of the North Dakota Petroleum Council, a Bismarck-based group that represents about 160 companies, said record oil production meant the same for natural gas.
"It was more than our plants could handle," Ness said.
The gas is only valuable if it can be moved to market, he said.
"We're seen infrastructure being put in place as rapidly as possible," Ness said. "Nobody — not the least of which the operator — wants to flare it."
A rush to develop the North Dakota's rich oil patch amid record prices resulted in billions of cubic feet of wasted natural gas that could have heated every home in the notoriously frigid state through at least two winters.
"Haste makes waste," said the Sierra Club's Schafer, one of less than a handful of professional environmentalists in North Dakota. "We just go crazy and we don't do it right. We could be protecting ourselves and we should be."
North Dakota crude also continues to lack the pipelines needed to move it to market, but it is hauled by truck or rail rather than wasted.
The state is on track to set record oil and gas production this year and next, industry and state officials say.
Short of a crash in oil prices, an inordinate amount of gas flaring appears to be a reality in North Dakota until infrastructure can keep pace with oil production.
Said Kringstad: "As long as rigs stay in North Dakota, we're always going to be chasing that goal of reduced flaring."
Copyright © 2009 The Associated Press. All rights reserved.
BISMARCK, N.D. — The burning glow over North Dakota's oil patch is slowly dimming as companies work to capture and sell natural gas instead of flaring it.
Though the flares atop the oil fields have lessened in recent months, it's still tough to stomach for those in North Dakota who question rising heating bills in the light of the huge hissing flames that burn natural gas as waste.
"I've heard comments here and there that it's too bad all that gas is going to waste," said Greg Armitage, who runs the Hilltop Home of Comfort nursing home in Killdeer, a western North Dakota town of about 700 in the heart of the state's oil fields.
A year ago, almost one-third of natural gas that came to the surface in North Dakota went up in smoke as an unmarketable byproduct of oil production. The 26 billion cubic feet of natural gas that billowed flames and smoke from scores of oil wells was about twice the annual gas consumption of the state.
More than $350 million in infrastructure improvements are either planned or under way in North Dakota to capture natural gas and move it to market, said Justin Kringstad, director of the state Pipeline Authority.
"It's being captured for economic reasons as well as for the environment," Kringstad said. "There are several things pushing these investments and each is equally important."
State and industry officials say the amount of gas flared has decreased from 25 percent of total production to 11 percent in the past few months as the capacity has increased at processing plants in the state and as pipelines are being built.
Wayde Schafer, a North Dakota spokesman for the Sierra Club, said any level of wasted energy is unacceptable.
"It was absolutely horrible," Schafer said of the amount of natural gas flared in 2008. "Now it's just terribly horrible.
"I think it's pretty hard to justify wasting a fuel source," Schafer said. "We're still getting the pollution without the benefit of the energy."
Flaring natural gas creates carbon dioxide emissions blamed for global warming.
Jim Semerad, manager of permitting and compliance for the state Health Department, said the flare emissions in the state's oil patch are within acceptable air quality guidelines. Still, he said, "just because they meet air quality standards doesn't mean we're happy with the wasted fuel."
Beyond air quality standards, there are no laws to discourage flaring in North Dakota, he said.
"The waste issue is off our regulatory ability," Semerad said. "We can't mandate it."
The U.S. Energy Department's Energy Information Administration says less than 1 percent of natural gas is flared from oil fields nationwide, and less than 3 percent worldwide.
"The goal is to get North Dakota down to the national average, or lower," Kringstad said. He's not sure when that might happen.
"The challenge is keeping up with new wells coming on line," Kringstad said.
The problem of unwanted natural gas comes from the success of the state's oil patch, which government scientists say is home to the largest continuous crude accumulation they've assessed. Improved horizontal drilling technology in the rich Bakken shale and Three Forks-Sanish formations has led to record crude production in the state, elevating it to the fourth-largest oil-producing state in the nation, leapfrogging from ninth since 2006.
Ron Ness, president of the North Dakota Petroleum Council, a Bismarck-based group that represents about 160 companies, said record oil production meant the same for natural gas.
"It was more than our plants could handle," Ness said.
The gas is only valuable if it can be moved to market, he said.
"We're seen infrastructure being put in place as rapidly as possible," Ness said. "Nobody — not the least of which the operator — wants to flare it."
A rush to develop the North Dakota's rich oil patch amid record prices resulted in billions of cubic feet of wasted natural gas that could have heated every home in the notoriously frigid state through at least two winters.
"Haste makes waste," said the Sierra Club's Schafer, one of less than a handful of professional environmentalists in North Dakota. "We just go crazy and we don't do it right. We could be protecting ourselves and we should be."
North Dakota crude also continues to lack the pipelines needed to move it to market, but it is hauled by truck or rail rather than wasted.
The state is on track to set record oil and gas production this year and next, industry and state officials say.
Short of a crash in oil prices, an inordinate amount of gas flaring appears to be a reality in North Dakota until infrastructure can keep pace with oil production.
Said Kringstad: "As long as rigs stay in North Dakota, we're always going to be chasing that goal of reduced flaring."
Copyright © 2009 The Associated Press. All rights reserved.
Sunday, November 15, 2009
Ohio Natural Gas Rate Lowest Yet
(AP) – 1 day ago
COLUMBUS, Ohio — Ohio's largest natural gas company says next month's rates will be the lowest for December in eight years.
Columbia Gas of Ohio informed state utility regulators Thursday that it plans to charge 49 cents per 100 cubic feet of natural gas, down from 70 cents a year ago. It means the typical customer will have a $92 December gas bill, compared to $170 for the same month in 2008.
The gas company says it's able to charge so little because gas supplies are plentiful and because commercial customers have cut back on the amounts they're using.
Copyright © 2009 The Associated Press. All rights reserved.
COLUMBUS, Ohio — Ohio's largest natural gas company says next month's rates will be the lowest for December in eight years.
Columbia Gas of Ohio informed state utility regulators Thursday that it plans to charge 49 cents per 100 cubic feet of natural gas, down from 70 cents a year ago. It means the typical customer will have a $92 December gas bill, compared to $170 for the same month in 2008.
The gas company says it's able to charge so little because gas supplies are plentiful and because commercial customers have cut back on the amounts they're using.
Copyright © 2009 The Associated Press. All rights reserved.
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