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The April natural gas wholesale exchange contract continues to gyrate between the trading range discussed previously between the mid $3.90’s and mid $3.70’s. The market had a little rally yesterday only to be met with sellers in the mid $3.90’s and finally settling at $3.93. Moving away from the April contract to the overall health of this market, it’s been an interesting week at CERA week with the wholesale discussion of our market occurring down the road from our office’s this week. CERA week (CEO’s of most energy companies speaking and meeting other leaders of the industry) and speakers have been discussing the “fracking process” and their concerns which may slow the gas production era that we are currently in. The theme of some of the discussions have been natural gas hasn’t been shown the promise of being the major source of low cost electricity and fuel due to the concerns of potential water contamination from the hydraulic fracturing process that is essential in unlocking natural gas in shale formations in the U.S. The industry also is struggling to remove the fuel’s reputation of being a reliable fuel source with previous boom or bust cycles in it’s history. Power generators are also having issues with making permanent retrofit’s to natural gas use on their coal power plants until some of these concerns are vetted out thoroughly with regulator’s and environmentalist’s. So in the meantime the perception in the wholesale market is that fracking is here to stay with the market experiencing low prices currently while the most intelligent minds are showing concerns.
On the electricity front this morning, PECO continues to purchase the electricity needed to serve customers who have not chosen to purchase their electricity from a competitive supplier in their deregulated market. Wholesale purchases by PECO are scheduled to begin shortly with bids and qualification materials being accepted from April 5 -- 26, 2011. PECO will purchase spot priced full-requirements supply for large commercial and industrial customers and purchasing winter and summer peak and one-year base load block energy supply for residential customers. PECO's procurement website, www.pecoprocurement.com, contains important information for electric generation suppliers on how to submit bids and details on PECO's future electric purchases. The site also serves as the company's central source of information for the purchases and provides the results of all previous procurements as well as other general information. The site is managed by NERA Economic Consulting, which also serves as the procurement coordinator and bid evaluator.
U.S. natural gas inventory levels on average are expected to fall by 77 billion cubic feet when weekly data from the U.S. Energy Information Administration are released early this morning. In the weekly Reuters survey of 27 industry traders and analysts, withdrawal estimates for the week ended March 4 ranged from 62 bcf to 87 bcf. Storage fell an adjusted 112 bcf for the same week last year. The five-year average decline for that week is 107 bcf. In last week's report, for the week ended Feb. 25, overall storage fell 85 bcf to 1.745 trillion cubic feet. The draw was near the Reuters estimate of 86 bcf but well below the year-ago drop of 124 bcf and the five-year average decline for that week of 131 bcf. The weekly decline narrowed the inventory deficit to last year by 39 bcf to 9 bcf, or 0.5 percent, and trimmed the shortfall to the five-year average by 46 bcf to 15 bcf, or 1 percent.
A total draw this morning at the Reuters survey estimate would leave stocks at a 26 bcf surplus to last year, the first since late January, and drive storage to a 15 bcf surplus to the five-year average. In the last four reports, total stocks fell 608 bcf, or 152 bcf per week, versus a 668 bcf adjusted drop for the same one-month period last year and a 588-bcf five-year average decline for that period. Early withdrawal estimates for next week's EIA report range from 43 bcf to 57 bcf versus a year-ago drop of 25 bcf and a five-year average decline for that week of about 58 bcf.
Storage hit an all-time high of 3.84 tcf in early November but dropped sharply this winter as frigid weather spiked heating demand and profitable cash premiums to futures prompted strong draws from inventory. More than 2 tcf was pulled from storage from December through February, or nearly 340 bcf, or 19 percent, above the five-year average for that three-month period. If weekly withdrawals through March 31 match the five-year average pace, inventories will end the heating season at 1.552 tcf, about 1 percent below average but still a comfortable level to start rebuilding stocks for next season.
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