Energy-Tel,LLC
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ENERGY UPDATE
December 18, 2011
NYMEX Updates: Friday (12/16/11)
Energy settlements:
December NYMEX settled: $3.127
The NYMEX one-year strip $3.39, 2-year strip 3.71, 3-year strip $3.94
Calendar 2012-$3.39, 2013-$4.03, 2014-$4.39
Last 12-month average NYMEX: $4.20
Last 3-year average: $6.437
Crude oil: $93.53
#2 fuel oil, $2.8005
Natural gas moved lower last week in spite of the triple digit storage withdrawal reported by the EIA. As January gas traded below the 2010 low, the one year strip price fell to its lowest level since August of 2002. Total open interest nearly reached one million contracts last week as the bears couldn't resist adding to short positions. Natural gas is greatly oversold with Friday's close nearly 3 standard deviations below the 20 week moving average, but with that said, it's path of least resistance for now is lower. The long range weather forecast is warmer than normal for the entire US, everyone has plenty of gas in storage and marketed production exceeds demand. The one to five year forward prices are all bargains and we encourage everyone to hedge far ahead and take advantage of the best "buyer's market" we've seen in a decade. In '07 & '08, the "first quarter low" was the expiration of the January contract on the final trading day of December. We may be lining up for a repeat of that show so don't get complacent. Hedge your future gas needs now.
Much is said about how shale gas has changed America’s energy position, with pundits even boasting that it’s made the US the “Saudi Arabia of natural gas.” For perspective, Saudi Arabia has 24% of the world’s proved reserves of crude oil, or about 264 billion barrels. The U.S. proved reserves of natural gas are 284 trillion cubic feet, which equates to 46.8 billion barrels of oil. Technically recoverable reserves for Saudi Arabia could be 700 billion barrels while the technically recoverable US gas may be 2,500 trillion cubic feet or 412.5 billion barrels of oil. We produce more natural gas in this country per year than Saudi Arabia produces oil. The U.S. produces the gas equivalent of 12.14 million barrels per day, compared with Saudi Arabia’s 9.8.
Can hydro-fracking cause earthquakes? There were 10 recently fracked gas wells within 1,000 feet of the epicenter of the Virginia based earthquake that rattled the east coast and damaged the Washington monument in August. In fairness, there were no fracking activities at the time of the last east coast quake in 1944.
Shale gas finds all over the globe will have to be the bridge fuel to provide electricity to a growing world. The dream of a world of clean nuclear power is running into the reality of uranium supply and demand. There are 62 modern nuclear power plants being built all over the world including 27 in China, 5 in India, 11 in Russia. Uranium is fast approaching a supply-demand deficit with 443 operating reactors, which need over 180 million pounds of uranium annually. The world produces only 130 million pounds a year. The shortfall of 50 million pounds annually is being filled until 2013 by the Russian highly enriched uranium (HEU) agreement, which Russia has indicated it will not renew, as it needs the fuel for their own reactors.
Please feel free to call me to discuss any questions you may have about your specific energy plan.
Have a great week, and thanks for your continued business.
Tony Gattuso
The analysis contained herein is based upon information Energy-Tel, LLC reasonably believes to be accurate. However, they do not guarantee the accuracy of the analysis.
Final Thoughts:
“Everything is in a state of flux, including the status quo.” Robert Byrne
