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Suez Weekly Market Monitor

Derek Mumford
Derek.mumford@suezenergyna.com
February 23rd, 2007

ERCOT Power

ERCOT power prices increased in the beginning of the week and took a slight decline towards the end of the week. At the close of the week, prices increased somewhat as they reacted to the increasing natural gas market.
ERCOT Prompt month deliveries closed at $58.90/MWh, decreasing $2.04MWh or 3.46%.
ERCOT ‘08 finished the week at $73.30/MWh down 2.06%.
ERCOT ’09 closed the week at $70.04MWh down 1.45%.
The prompt month for the Houston Zone finished at $62.08/MWh an decrease of 3.81% and the prompt month North Zone finished at $60.90/MWh down 3.35%.

NYISO—NEPOOL Power

Northeast power prices increased slightly at the beginning of the week. Prices took a turn at the end the week finishing lower compared to last week.
Prompt month prices for the Northeast are 3% to 12% less than 3 months ago for the same trading month.
NYISO Zone J prompt month closed the week at $89.35/MWh decreasing $4.15/MWh a change of 4.64%.
NYISO Zone A prompt month finished at $62.00/MWh a loss of $3.50/MWh or 5.65%.
Massachusetts NEMA prompt month closed down at $78.20/MWh a change of 5.50% or $4.30/MWh.
Massachusetts SEMA prompt month finished the week at $71.70/MWh, decreasing 6.00%.

PJM Power

PJM power prices took a slight jump at the end of the week as it reacted to the natural gas prices.
Cinergy prompt month finished the week at $55.50/MWh, a change of 6.76% decreasing $3.75/MWh.
NI Hub prompt month finished down $3.90/MWh to close at $55.35/MWh, a change of 7.05%.
PJM West Hub prompt month lost $3.50/MWh closing at $65.00/MWh, a change of 5.38%.
PSEG prices for the prompt month closed at $69.53/MWh, a change of 5.03% or $3.50/MWh.
Compared to 3 months ago, PJM prices are 2% to 5% less for the same trading period.

Natural Gas Market

Natural gas prices started the week with a slight increase and took a dip midweek before taking another turn at the end of the week.
NYMEX prices for the prompt month finished the week at $7.50/MMBtu a decrease of 4.32% or $0.32/MMBtu.
March 2007 prices are 9.01% lower than 3 months ago for the same delivery period.
NYMEX Bal. ‘07 closed at $7.96/MMBtu a change of 3.88%, down $0.31/MMBtu.
NYMEX Cal ‘08 finished the week at $8.30/MMBtu; NYMEX Cal ‘09 closed at $7.93/MMBtu.
Algonquin, Transco Z6, and Tetco M3 prompt month closed at $1.45/MMBtu, $1.59/MMBtu, and $1.12/MMbtu respectively.

Natural Gas Storage: Gas in Storage Decreased 259 Bcf

Working gas in storage was 2,088 Bcf as of Friday, February 9, 2007, according to EIA estimates.
This represents a net decline of 259 Bcf from the previous week.
Stocks were 193 Bcf less than last year at this time and 268 Bcf above the 5-year average of 1,820 Bcf.
In the East Region, stocks were 151 Bcf above the 5-year average following net withdrawals of 179 Bcf.
Stocks in the Producing Region were 109 Bcf above the 5-year average of 567 Bcf after a net withdrawal of 68 Bcf.
Stocks in the West Region were 8 Bcf above the 5-year average after a net drawdown of 12 Bcf. At 2,088 Bcf, total working gas is within the 5-year historical range.

(Source: EIA)

Crude Oil Falls as Mild Weather Curbs U.S. Heating-Fuel Demand

Crude oil fell below $58 a barrel as warmer weather moved into the eastern U.S. and Europe, curbing heating-fuel consumption.

Temperatures in New York are forecast to rise to 50 degrees Fahrenheit (10 Celsius) today, 8 degrees above normal, the National Weather Service said. U.S. refineries begin maintenance programs in late February before gasoline demand increases with the arrival of the driving season in May. Valero Energy Corp.'s McKee refinery in Texas was shut on Feb. 16 because of a fire.

“Refiners are shutting units because of lower demand and preparing for the gasoline season,” said Eric Wittenauer, an energy analyst at A.G. Edwards & Sons Inc. in St. Louis. “If the recent refinery problems occurred during gasoline season, prices would be higher.”

Crude oil for March delivery fell $1.57, or 2.6 percent, to $57.82 a barrel at 1:27 p.m. on the New York Mercantile Exchange. The March contract expires today. The more-active April contract declined $1.51, or 1.5 percent, to $58.35 a barrel. Prices are down 5.4 percent from a year ago.

There was no floor trading yesterday because of the Presidents Day holiday. Electronic trading was unaffected by the holiday. There was no settlement price yesterday.

Daily price swings in crude oil futures are widening. Futures fell or rose more than 1.5 percent on 26 trading days in the past two months compared with 15 days in the same period a year earlier, according to data compiled by Bloomberg.

U.S. gasoline use peaks between late May's Memorial Day holiday and Labor Day in early September.

Warmer Weather:

“It's much warmer than it has been,” said Joel Burgio, a forecaster for Meteorlogix LLC in Lexington, Massachusetts. “Friday and Saturday will be about 3 to 6 degrees below normal in the Northeast and then moderate again next week. This is nothing compared with what we had the last couple weeks.”

Thermometers plunged to 12 degrees Fahrenheit (-15 Celsius) yesterday, 17 degrees below normal. Temperatures along the East Coast are expected to be above normal from Feb. 25 through March 5, according to the National Weather Service.

“The normal highs are rising at between 1 and 2 degrees a week right now and that will accelerate to 2 to 3 degrees when we get into March,” Burgio said. “The coldest temperatures in the Northeast usually occur between the third week of January and the first week of February.”

Temperatures in London may climb to 12 degrees Celsius (54 Fahrenheit) tomorrow from today's high of 9 degrees, the British Broadcasting Corp. said on its Web site. The normal daily high temperature at this time of year is 7 degrees, according to weather data on Bloomberg. Heating oil for March delivery plunged 4.59 cents, or 2.7 percent, to $1.6275 a gallon in New York. Futures touched $1.6055, the lowest intraday price since Jan. 30.

Heating Season Ends:

“The warmer weather is concentrating minds on the fact that the end of heating season is near,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Crude-oil supplies should build in the next couple of months as refineries perform maintenance.”

Iran, the world's fourth-largest oil producer, has the “right” to pursue its nuclear program, Iranian President Mahmoud Ahmadinejad said today, rejecting the request of a United Nations Security Council to halt uranium enrichment by tomorrow.

The Security Council unanimously voted Dec. 23 to impose sanctions on Iran over the program, including a ban on the acquisition of materials and technology that might be used to build nuclear weapons. The UN also froze the assets of individuals and groups associated with the program and gave Iran 60 days to halt enrichment.

The U.S. accuses Iran of trying to develop nuclear weapons. Iran, which holds the world's secondlargest oil and natural-gas reserves, denies it is seeking a bomb and says the aim of its program is to enrich uranium to fuel power stations, as permitted under the terms of the Non-Proliferation Treaty.

U.S. Force Buildup:

A U.S. aircraft carrier battle group led by the USS John C. Stennis arrived in the Persian Gulf region as part of a buildup of forces amid heightened tension with Iran. The Nimitz-class Stennis arrived in the region Feb. 15 to join the USS Dwight D. Eisenhower as the second aircraft carrier battle group in the region, the U.S. Navy's Fifth Fleet said today.

Almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf.

“This has been going on for a long time and supplies are continuing to flow, so you get complacent,” said Kyle Cooper, director of research at IAF Advisors in Houston. “If some action cutting supply occurs, the market will react violently. While the threats have continued inventories are high.”

Brent crude oil for April settlement fell 68 cents, or 1.2 percent, to $57.46 a barrel on the London-based ICE Futures exchange. Yesterday, the Brent contract fell 81 cents, or 1.4 percent, to $58.14 a barrel.

 

Derek Mumford
Energy Analyst
Suez Energy Resources
Derek.mumford@suezenergyna.com



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