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Fall 2012 Issue 10 

Welcome to Howell Energy Consulting  

Howell Energy Consulting brings you the opportunity to focus on the core mission of your business, while allowing an energy professional to create competition for your electricity and natural gas requirements through managed procurement.

Howell Energy Consulting is a licensed energy professional in Connecticut and Massachusetts. For more information :

phone: 860-205-3863
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Energy Price Outlook  



It is annoying to be right when you are hoping to be wrong.  Yes the natural gas market did bottom out this past spring and now we are looking at prompt month natural gas prices in the $3.50/MMBtu range, $1.55/MMBtu higher than the low set on April 17th (see the graphic below).  It was argued this past summer that if prompt month natural gas prices rose above $3.00/MMBtu owners of generation with a portfolio of fuel types would switch to coal.  In fact this seemed to be the case during the summer. Each time natural gas prices would approach $3.00/MMBtu, prices would be pushed back down with the exception being the latter half of July when it was exceptionally hot.


It wasn't until the end of September that natural gas broke through the $3.00/MMBtu resistance. Soon after the closing of the October contract prices, the November contract moved quickly to $3.53/MMBtu by October 2.  Since then prices have been back and forth but below $3.50/MMBtu.


The jump in natural gas prices has been attributed to the seasonal change in weather and higher demand.  The EIA in its October 10th Weekly Outlook notes that east of the Rockies weather is expected to be nearly normal. A normal winter though is still 20% colder than the incredibly mild winter we had last year.


Add to that demand is increasing. The EIA also reported in its October 10th Weekly Outlook that the demand for natural gas is up nearly 18.6% on a year over year basis spurred forward by a 38% increase in demand from the residential and commercial sectors as well as a 13% increase in the power generation sector.


The supply picture on the other hand has indicated a tightening. While natural gas storage as of October 26th was 3,908 Bcf, 3.6% higher than last year's 3,772 Bcf and higher than the record set last year of 3,849 Bcf, the average weekly injection in 2012 has been very low. In 2011 the average weekly injection was 70 Bcf while in 2012 the average weekly injection has only been 44 Bcf. So production has slowed.  Further evidence of slowing production is that Baker Hughes reports that the number of rigs dedicated to natural gas is down to 416 a drop of 518 from where it was at the end of last October.


So the outlook has gone from neutral to bullish, higher demand exacerbated by lower production may continue to push natural gas prices and therefore power prices higher throughout the winter.


Outlook and Buying Strategies:
With the natural gas and power markets beginning to tighten the expectation of Howell Energy Consulting is for prices to rise  through this winter. What this means for Connecticut Standard offer procurement is that for those large customers that receive pricing on a 3 month basis that this is a good time to fix a price. See the strategies below.
Possible strategies include:

  • If you are determined to wait for a break in the recent upswing look towards the weather and the economy.  The colder the weather and the more optimistic the economic outlook the more pressure there will be on supply and prices.


  • Buyers with contract terms that end later in 2012 or early in 2013 may want to test the market now to set a baseline price.  Have a price in mind and if the market can get to your price you should execute a power or natural gas contract. 


  • If you are comparing a monthly price to a term price note that as the monthly price increases so does the term price.  The $.07 utility one month price looks pretty good when compared to the $.08 twelve month marketer's price but when the single month utility price does increase to $.08/KWh the twelve month marketer price may be over  $.085! 


To understand how these strategies apply to your business call Howell Energy Consulting to to create a procurement plan for your organization.
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About Derek Howell 

With over 30 years in the energy industry and 13 years of experience in the deregulated energy business, Derek Howell's expertise covers the broad expanse of the electricity and natural gas markets.  


Prior to the founding of Howell Energy Consulting. Mr. Howell  was Direct Energy's Director of Retail Pricing for  New England and New York regions. 


In This Issue
Energy Price Outlook
Colder weather ahead
The Rig Count

Colder weather ahead


Well..yeah. If that isn't the most obvious statement ever then I don't know what would be!  Still it is worth noting that the EIA in its Weekly Outlook is calling for a nearly normal winter this year. For Connecticut that means a winter that is 20% colder than last year. I am sure there are skiers out there that are happy with that outlook but personally I thought last winter was about as good as one might expect. The implications of colder weather in the natural gas and power markets are profound. Not only will higher demand put pressure on prices today but a draw down of natural gas storage will lift future prices as well.  If we see a normal winter these today's relatively low prices could become a distant memory.

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The Rig Count 


It is difficult to monitor natural gas supply on an ongoing basis so traders, suppliers and marketers rely on the the Natural Gas Rig count that is published by Baker Hughes every Friday. The rig count provides estimates of the number natural gas rigs actively drilling for natural gas and oil in each of the states and provinces of North America. As the number of natural gas rigs increase it is assumed that natural gas production will also increase. So this past summer and now into the fall it has been with great interest that traders,suppliers and marketers have watched the precipitous fall in the number of natural gas rigs. From the end of May to the middle of October there has been a 11% drop in the number of natural gas rigs. On a year over year basis there has been 53% drop. The explanation for this drop is easy and it is the price of crude oil. If your choice is to drill for crude oil at $90/BBl roughly equivalent to $15/MMBtu or natural gas at $3.50/MMBtu the answer is pretty simple 


Howell Energy Consulting is monitoring this dynamic to help you plan forward.




















To learn more about Howell Energy Consulting Go to:
Derek Howell
Howell EnergyConsulting LLC