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The April natural gas wholesale exchange contract quieted down slightly yesterday while the rest of the world remained very uneasy on the news coming out of Japan and the Middle East. As Libyan turmoil continues and the Japanese struggle to keep their damaged nuclear power plants from melting down, the wholesale natural gas exchange contract traded in an 11 cent range between the high price and the low price on moderate volume finally settling at $3.938. With spring approaching, the withdrawals from storage are becoming less and less (technical term) as we get to the injection season next month or late March as we do on some years. Wholesale natural gas contracts had advanced for the prior three sessions as energy tra”d”ers (spelled with a “d” not a “t”) bet that wholesale contracts had priced in the seasonal dip in U.S. demand and that increased Japanese gas needs would lift global prices for the heating fuel. Much of Japan's nuclear-power generation capacity remained offline Wednesday following Friday's deadly earthquake and tsunami, and the likelihood of sustained outages boosted prices for global fuels on which the country will likely rely instead, including liquefied natural gas. While the U.S. isn't a major LNG importer and lacks significant export capacity, speculation that global supplies of the fuel would tighten spurred some buying this week in what has been a listless, range-bound market. Given the rising concern about nuclear power, Dow Jones reports that Morningstar analyst Michael Tian thinks a “possible paradigm” shift in global energy strategy may be underway. The main beneficiaries of this thinking are possibly coal and natural gas companies. Coal companies would benefit more outside the U.S. since the present paradigm is to retro-fit as many coal plants as financially possible in this country.
As we discuss on most Thursday’s, the eestimates for this morning’s storage change figure are PIRA calling for a draw of 41 bcf, Dow Jones survey at 44 bcf while Bentek and the BNP Paribas survey are calling for draws of 45 bcf. Last year at this time we experienced a draw of 25 bcf, however, warm weather continues across the entire country for the next 15 days. Keep in mind also that the open interest has dropped almost 60,000 contracts in the last week as some short positions are gradually being covered (folks that were betting on lower prices and since changed their minds and re-purchased wholesale contracts that were previously sold).
On the emissions front this morning, the U.S. Environmental Protection Agency (EPA) yesterday unveiled a plan to require coal- and oil-fired power plants to reduce emissions of mercury and 83 other toxics by 2016. The proposed rules would limit the amount of toxic pollution that can be released into the air for every unit of electricity that is generated. In total, the plan would reduce mercury and acid gas emissions from the U.S. power sector by 91 percent while cutting soot-forming sulfur dioxide (SO2) pollution by 53 percent, the agency said. The proposal, which will be followed by a final rule in November, would force some utilities to spend hundreds of millions of dollars to upgrade older power plants that have not already been required to install controls. All the controls will cost about $10.9 billion per year, according to EPA's analysis of the new rules, compared to benefits of $59 billion to $140 billion. Once the rules are final, companies will have three years to comply with the new rules, though they can get a one-year extension if it proves impossible to get the controls added in time. Many power plants might need an activated carbon injection unit to control their mercury emissions, as well as flue gas desulfurization or "scrubbers," to limit their emissions of acid gases. Others might need baghouses, fabric filtering units that keep toxic metals out of the air by trapping the fine particles that are released when fuel is burned. Scrubbers have been installed at many plants because of separate limits on SO2, including a cap-and-trade program that was created two decades ago to fight acid rain.
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