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The December wholesale exchange contract was lower on Friday by $0.07 on the day as warmer weather continues in most of the gas consuming regions of the country. It seems like La Nina is in full force and above normal temperatures are being forecasted for the Eastern U.S. through the remainder of the month. This also lends itself into the storage injections which continue through the rest of the month and should put additional pressure on short-term wholesale prices. As the market looks for signs for some of this supply growth to dissipate, the only hopeful sign was that rig counts hit a three and a half month low which could diminish the prospects for additional supply in the intermediate term (see below). On the EIA storage front this week, most analyst’s are expecting an injection of about 28 bcf which would put the overall storage inventory levels above the all time high of 3,840 bcf.
On the wholesale front, the number of rigs drilling for natural gas in the United States slid by 30 this week to a 3-1/2-month low of 877, the third decline in four weeks, and data from oil services firm Baker Hughes showed on Friday. The gas-directed rig count, which hit a 9-1/2-month high of 936 just four weeks ago, is down 11.6 percent from its 2010 peak of 992. That, in turn, was its highest since February 2009, when 1,018 rigs were drilling for gas. Horizontal rigs, the type most often used to extract oil or gas from shale, fell by five to 1,152 after climbing to a record high of 1,157 last week. The gas rig count of 877 remains well above the 800 level that some analysts say is needed to cut production significantly and tighten overall supplies. Most analysts expect no major slowdown in domestic gas output until the second half of next year. The gas rig count is 45 percent off its record peak of 1,606 from September 2008, and 78 rigs, or 8 percent, below the same week last year. Rising output from shale gas has been the primary driver of increased gas production in the last few years, and most energy traders agree it will be difficult to tighten the loose gas market unless horizontal gas drilling slows sharply. Without serious production cuts or a stronger economic recovery to boost industrial demand, which accounts for about 30 percent of gas consumption, few traders expect much upside in gas prices in the near term.
Back in the news, Connecticut Power and Lighting has offered to create a $10 million fund for customers' losses from the Halloween weekend storm. “It is just "a beginning," Gov. Dannel P. Malloy said Thursday. But state lawmakers on both sides of the aisle harshly criticized the proposal. The day after a series of initiatives was announced by CL&P's parent company, Northeast Utilities, Malloy told reporters that during the various studies of the actions of both CL&P and United Illuminating, the landscape may change. "I suspect ultimately it's a beginning," Malloy said during an unrelated news conference in the Legislative Office Building. "As we examine this episode we're going to learn a lot more about the preparedness and the response and for us to pretend that a storm of this magnitude would not have created some amount of outage for some period of time is unrealistic. So as we look toward helping individuals, I think we need to take that into account." It seems that CL&P response has been to offer the governor $10 million to use at his discretion which appears to be from a charitable fund. At first blush they're taking money away from charitable giving to buy some goodwill with the state and the governor.
As most unregulated energy suppliers are envisioning doing or have plans to do so in the near future, Direct Energy, has reached an agreement to acquire Home Warranty of America (HWA), a leading supplier of whole home protection plans across the United States. With this addition to its Services business, Direct Energy will leverage the scale of the HWA platform and its own expertise in operating a successful home protection plan business in Canada, to establish the premier energy and home services offering for residential customers in North America. Headquartered in Buffalo Grove, Illinois, HWA provides whole home warranty services directly to customers and through a national network of real estate agents, insurance professionals, relocation companies, developers, title companies, bankers, home inspectors and mortgage brokers. With the necessary capabilities and licenses to operate in all 50 states, HWA's comprehensive service delivery network, enterprise software and call center will support Direct Energy's continued growth as North America's largest home energy service provider.
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