cera monthly briefing : supply anxiety - cera alert here is cera ' s monthly forecast . it is predicting october differentials at
chicago of $ . 11 .
- - - - - - - - - - - - - - - - - - - - - - forwarded by lorna brennan / et & s / enron on 09 / 18 / 2000
02 : 06 pm - - - - - - - - - - - - - - - - - - - - - - - - - - -
webmaster @ cera . com on 09 / 15 / 2000 10 : 33 : 24 pm
to : lorna . brennan @ enron . com
cc :
subject : cera monthly briefing : supply anxiety - cera alert
cera alert : sent fri , september 15 , 2000
title : cera monthly briefing : supply anxiety
author : n . american natural gas team
e - mail category : alert
product line : north american gas ,
url : http : / / www . cera . com / cfm / track / eprofile . cfm ? u = 5526 & m = 1357 ,
alternative url :
as the heating season approaches , a high  * but justified  * level of anxiety
regarding winter supplies is driving the gas market . as things stand , the
market
is headed into the winter exposed to a supply shortfall late in the winter
even
under normal weather conditions . this prospect has placed a floor on the gas
price at the price of residual fuel oil , itself priced in the mid - to upper
$ 4 . 00 s
range . gas prices moving into this range would begin to attract demand back
into the market , diverting supplies from storage and increasing supply
concerns
again . to the upside , there is little demand response to price until
industrial
demand lessens or the price of distillate oil , as of this writing near $ 7 . 00
per
million british thermal units ( mmbtu ) , is breached . however , distillate
markets
themselves are extremely tight , and prices for that fuel would likely follow
gas
prices up . within this range , prices are defined mainly by supply anxiety  * the
market  , s judgment of the likelihood of a supply shortfall , which would be
characterized by extreme pricing and volatility , and a difficult process of
supply
allocation by price .
by now , exposure to extreme price volatility this winter is certain . although
cera expects storage injections to increase by approximately 2 . 0 billion cubic
feet ( bcf ) per day from august to september , this increase would still leave
inventories at record lows for this month and next . even this increase in
injections will not occur if a tropical storm forces evacuation of offshore
platforms , or if hot weather returns .
for october , heating load enters the picture . with us supplies running close
to
year - earlier levels and imports slightly higher , demand priced out of the
market
will remain the key reason that storage injections increase at all from last
year  , s
low level . as a result , although prices may close the month of september in
the
upper $ 4 . 00 s per mmbtu , at the high end of the competitive range with resid ,
any threat of interruption in supplies will quickly bounce prices upward
during
the remainder of september or in october . as the heating season begins ,
therefore , cera expects the reality of supply vulnerability for the winter to
result in the first ever monthly average price of $ 5 . 00 at the henry hub ( see
table 1 ) and the first of potentially many months at or above that price .
gas storage  * new record lows
cera estimates that storage inventories in the united states crossed into
record
low territory as of the end of august , when inventories of 2 , 233 bcf fell
below
the previous 1996 record low of 2 , 245 bcf ( see table 2 ) . more records will
likely be broken in the coming months , and by widening margins . injections for
september are expected to average 9 . 5 bcf per day , an increase of 2 . 0 bcf per
day from the august level but below last year  , s pace of 10 . 3 bcf per day .
cera  , s september estimate could be exceeded under mild weather conditions
with no tropical activity hitting the gulf of mexico , but injections would
likely
fall below the 9 . 5 bcf per day rate should storm activity force evacuation of
platforms . this rate would leave us inventories at 2 , 518 bcf at month  , s end , a
record low by 87 bcf .
for october , cera expects a slight increase in the injection rate from last
year .
injections of 5 . 5 bcf per day on average this year would be enabled by demand
priced out of the market and by a lack of unusually cool weather or tropical
storm activity . october injections have varied historically from 4 . 0 bcf per
day
( 1989 ) to 8 . 5 bcf per day ( 1998 ) . even if injections reached toward the upper
end of this range , the market would remain exposed to shortfalls during the
winter . at the expected injection rate , us inventories of 2 , 689 bcf at the
end of
october would result in an end of march 2001 inventory level of 669 bcf under
normal winter weather , 89 bcf below the previous record low of 758 bcf .
regional markets  * waiting for winter
the pipeline explosion on el paso during late august intensified the
subregional
pressures already at play in western gas markets . cuts in pipeline flows
limited
access into california on the only pipeline route into the state with any
excess
capacity . the lack of supply pressured prices within the supply basins and
forced strong storage withdrawals in the california market . although summer
power loads in california will ease and much of the el paso capacity has been
restored , the race to improve storage positions before the onset of winter
heating
load will keep intense pressure on topock prices . differentials in the rest
of the
west will strengthen as local heating loads begin to absorb enough supply to
ease pipeline bottlenecks ( see table 3 ) .
differentials in the east , which have traded in a narrow range this summer ,
will
likely reach slightly higher levels with the start of the heating season in
october .
however , exposure to pricing disconnects will remain low until later this
year .
cera  , s outlook by region follows :
* rockies . pipeline bottlenecks out of the rocky mountains
this summer should begin to ease as heating loads climb
during october . cera expects that as local demand limits
pressure on pipeline capacity , differentials will narrow .
october differentials should average $ 0 . 50 per mmbtu .
* san juan . the resumption of flows on el paso  , s southern
system , combined with production outages , has relieved
some of the access constraints on san juan supply .
seasonal declines in rockies to southwest flows and the
beginning of the heating season should narrow october
differentials to $ 0 . 35 per mmbtu .
* permian and mid - continent . the continuing pull on
supplies from the west will support permian prices , and the
midwestern pull on supplies will support mid - continent
prices . cera expects a differential to the henry hub of
$ 0 . 06 per mmbtu for mid - continent supplies and $ 0 . 11
per mmbtu for permian supplies .
* chicago . the delay in the in - service date for alliance from
october 2 to october 30 will take some gas out of the
chicago market next month . this delay , combined with the
need to build midwest storage inventories , should sustain
the recent increase in differentials from the $ 0 . 05  ) $ 0 . 08
range to above $ 0 . 10 per mmbtu . cera expects october
differentials at the chicago citygate to average $ 0 . 11 .
* northeast markets . gas prices near $ 5 . 00 have increased
the fuel cost of delivery from the gulf coast into the
northeast , raising the floor level for differentials to near
$ 0 . 30 per mmbtu . the beginning of the heating season and
the lack of new capacity into the new york citygate should
support differentials above the floor during october , at near
$ 0 . 40 per mmbtu .
canadian markets  * outages affect supply
outages have affected supply thus far in september . both british columbia and
alberta have been affected , resulting in a further year - over - year decline in
western canadian supply . the various problems appear to be rectified , but the
average supply for the month is likely to be down 100 to 150 million cubic
feet
( mmcf ) per day from september 1999 .
drilling has been adversely affected over the past several weeks by wet
weather ,
but rig utilization is beginning to climb again to previous levels . more than
8 , 400 gas wells are expected for this year .
slight drop in export demand
eastern canadian demand is still down approximately 200 mmcf per day , with
cooler - than - normal weather reducing the need for air conditioning . in the west
however , cooler - than - normal weather has accounted for an increase in demand
for heating requirements of about 200 mmcf per day .
exports are down slightly in september compared with september 1999 , with
pg & e gt - nw off 110 mmcf per day . northern border is running even with
september 1999 .
storage picture brighter in canada
storage injections in eastern canada have picked up , with inventories now
expected to reach the five - year average of 210 bcf . in the west , inventories
at
the end of the injection season will not only be above the five - year level but
should be even with those of 1999 , at 250 bcf .
wider differentials holding
after widening substantially in august to us $ 1 . 17 , the aeco - to - henry
differential has closed back to a more typical level of $ 0 . 60 in september .
september  , s aeco price should average us $ 4 . 15 per mmbtu ( c $ 5 . 79 per
gigajoule [ gj ] ) , increasing in october to us $ 4 . 35 per mmbtu ( c $ 6 . 07 per gj ) .
* * end * *
cera ' s autumn 2000 roundtable event dates and agendas are now available at
http : / / www . cera . com / event
account changes
to edit your personal account information , including your e - mail
address , etc . go to : http : / / eprofile . cera . com / cfm / edit / account . cfm
this electronic message and attachments , if any , contain information
from cambridge energy research associates , inc . ( cera ) which is
confidential and may be privileged . unauthorized disclosure , copying ,
distribution or use of the contents of this message or any attachments ,
in whole or in part , is strictly prohibited .
terms of use : http : / / www . cera . com / tos . html
questions / comments : webmaster @ cera . com
copyright 2000 . cambridge energy research associates
cera monthly briefing : supply anxiety - cera alert
here is cera ' s monthly forecast . it is predicting october differentials at
chicago of $ . 11 .
- - - - - - - - - - - - - - - - - - - - - - forwarded by lorna brennan / et & s / enron on 09 / 18 / 2000
02 : 06 pm - - - - - - - - - - - - - - - - - - - - - - - - - - -
webmaster @ cera . com on 09 / 15 / 2000 10 : 33 : 24 pm
to : lorna . brennan @ enron . com
cc :
subject : cera monthly briefing : supply anxiety - cera alert
cera alert : sent fri , september 15 , 2000
title : cera monthly briefing : supply anxiety
author : n . american natural gas team
e - mail category : alert
product line : north american gas ,
url : http : / / www . cera . com / cfm / track / eprofile . cfm ? u = 5526 & m = 1357 ,
alternative url :
as the heating season approaches , a high  * but justified  * level of anxiety
regarding winter supplies is driving the gas market . as things stand , the
market
is headed into the winter exposed to a supply shortfall late in the winter
even
under normal weather conditions . this prospect has placed a floor on the gas
price at the price of residual fuel oil , itself priced in the mid - to upper
$ 4 . 00 s
range . gas prices moving into this range would begin to attract demand back
into the market , diverting supplies from storage and increasing supply
concerns
again . to the upside , there is little demand response to price until
industrial
demand lessens or the price of distillate oil , as of this writing near $ 7 . 00
per
million british thermal units ( mmbtu ) , is breached . however , distillate
markets
themselves are extremely tight , and prices for that fuel would likely follow
gas
prices up . within this range , prices are defined mainly by supply anxiety  * the
market  , s judgment of the likelihood of a supply shortfall , which would be
characterized by extreme pricing and volatility , and a difficult process of
supply
allocation by price .
by now , exposure to extreme price volatility this winter is certain . although
cera expects storage injections to increase by approximately 2 . 0 billion cubic
feet ( bcf ) per day from august to september , this increase would still leave
inventories at record lows for this month and next . even this increase in
injections will not occur if a tropical storm forces evacuation of offshore
platforms , or if hot weather returns .
for october , heating load enters the picture . with us supplies running close
to
year - earlier levels and imports slightly higher , demand priced out of the
market
will remain the key reason that storage injections increase at all from last
year  , s
low level . as a result , although prices may close the month of september in
the
upper $ 4 . 00 s per mmbtu , at the high end of the competitive range with resid ,
any threat of interruption in supplies will quickly bounce prices upward
during
the remainder of september or in october . as the heating season begins ,
therefore , cera expects the reality of supply vulnerability for the winter to
result in the first ever monthly average price of $ 5 . 00 at the henry hub ( see
table 1 ) and the first of potentially many months at or above that price .
gas storage  * new record lows
cera estimates that storage inventories in the united states crossed into
record
low territory as of the end of august , when inventories of 2 , 233 bcf fell
below
the previous 1996 record low of 2 , 245 bcf ( see table 2 ) . more records will
likely be broken in the coming months , and by widening margins . injections for
september are expected to average 9 . 5 bcf per day , an increase of 2 . 0 bcf per
day from the august level but below last year  , s pace of 10 . 3 bcf per day .
cera  , s september estimate could be exceeded under mild weather conditions
with no tropical activity hitting the gulf of mexico , but injections would
likely
fall below the 9 . 5 bcf per day rate should storm activity force evacuation of
platforms . this rate would leave us inventories at 2 , 518 bcf at month  , s end , a
record low by 87 bcf .
for october , cera expects a slight increase in the injection rate from last
year .
injections of 5 . 5 bcf per day on average this year would be enabled by demand
priced out of the market and by a lack of unusually cool weather or tropical
storm activity . october injections have varied historically from 4 . 0 bcf per
day
( 1989 ) to 8 . 5 bcf per day ( 1998 ) . even if injections reached toward the upper
end of this range , the market would remain exposed to shortfalls during the
winter . at the expected injection rate , us inventories of 2 , 689 bcf at the
end of
october would result in an end of march 2001 inventory level of 669 bcf under
normal winter weather , 89 bcf below the previous record low of 758 bcf .
regional markets  * waiting for winter
the pipeline explosion on el paso during late august intensified the
subregional
pressures already at play in western gas markets . cuts in pipeline flows
limited
access into california on the only pipeline route into the state with any
excess
capacity . the lack of supply pressured prices within the supply basins and
forced strong storage withdrawals in the california market . although summer
power loads in california will ease and much of the el paso capacity has been
restored , the race to improve storage positions before the onset of winter
heating
load will keep intense pressure on topock prices . differentials in the rest
of the
west will strengthen as local heating loads begin to absorb enough supply to
ease pipeline bottlenecks ( see table 3 ) .
differentials in the east , which have traded in a narrow range this summer ,
will
likely reach slightly higher levels with the start of the heating season in
october .
however , exposure to pricing disconnects will remain low until later this
year .
cera  , s outlook by region follows :
* rockies . pipeline bottlenecks out of the rocky mountains
this summer should begin to ease as heating loads climb
during october . cera expects that as local demand limits
pressure on pipeline capacity , differentials will narrow .
october differentials should average $ 0 . 50 per mmbtu .
* san juan . the resumption of flows on el paso  , s southern
system , combined with production outages , has relieved
some of the access constraints on san juan supply .
seasonal declines in rockies to southwest flows and the
beginning of the heating season should narrow october
differentials to $ 0 . 35 per mmbtu .
* permian and mid - continent . the continuing pull on
supplies from the west will support permian prices , and the
midwestern pull on supplies will support mid - continent
prices . cera expects a differential to the henry hub of
$ 0 . 06 per mmbtu for mid - continent supplies and $ 0 . 11
per mmbtu for permian supplies .
* chicago . the delay in the in - service date for alliance from
october 2 to october 30 will take some gas out of the
chicago market next month . this delay , combined with the
need to build midwest storage inventories , should sustain
the recent increase in differentials from the $ 0 . 05  ) $ 0 . 08
range to above $ 0 . 10 per mmbtu . cera expects october
differentials at the chicago citygate to average $ 0 . 11 .
* northeast markets . gas prices near $ 5 . 00 have increased
the fuel cost of delivery from the gulf coast into the
northeast , raising the floor level for differentials to near
$ 0 . 30 per mmbtu . the beginning of the heating season and
the lack of new capacity into the new york citygate should
support differentials above the floor during october , at near
$ 0 . 40 per mmbtu .
canadian markets  * outages affect supply
outages have affected supply thus far in september . both british columbia and
alberta have been affected , resulting in a further year - over - year decline in
western canadian supply . the various problems appear to be rectified , but the
average supply for the month is likely to be down 100 to 150 million cubic
feet
( mmcf ) per day from september 1999 .
drilling has been adversely affected over the past several weeks by wet
weather ,
but rig utilization is beginning to climb again to previous levels . more than
8 , 400 gas wells are expected for this year .
slight drop in export demand
eastern canadian demand is still down approximately 200 mmcf per day , with
cooler - than - normal weather reducing the need for air conditioning . in the west
however , cooler - than - normal weather has accounted for an increase in demand
for heating requirements of about 200 mmcf per day .
exports are down slightly in september compared with september 1999 , with
pg & e gt - nw off 110 mmcf per day . northern border is running even with
september 1999 .
storage picture brighter in canada
storage injections in eastern canada have picked up , with inventories now
expected to reach the five - year average of 210 bcf . in the west , inventories
at
the end of the injection season will not only be above the five - year level but
should be even with those of 1999 , at 250 bcf .
wider differentials holding
after widening substantially in august to us $ 1 . 17 , the aeco - to - henry
differential has closed back to a more typical level of $ 0 . 60 in september .
september  , s aeco price should average us $ 4 . 15 per mmbtu ( c $ 5 . 79 per
gigajoule [ gj ] ) , increasing in october to us $ 4 . 35 per mmbtu ( c $ 6 . 07 per gj ) .
* * end * *
cera ' s autumn 2000 roundtable event dates and agendas are now available at
http : / / www . cera . com / event
account changes
to edit your personal account information , including your e - mail
address , etc . go to : http : / / eprofile . cera . com / cfm / edit / account . cfm
this electronic message and attachments , if any , contain information
from cambridge energy research associates , inc . ( cera ) which is
confidential and may be privileged . unauthorized disclosure , copying ,
distribution or use of the contents of this message or any attachments ,
in whole or in part , is strictly prohibited .
terms of use : http : / / www . cera . com / tos . html
questions / comments : webmaster @ cera . com
copyright 2000 . cambridge energy research associates