SPECIAL REPORT | November 19, 2010

Peripheral visions

Why debt restructuring is likely WHILE THE MARKETS WERE FOCUSED ON ANOTHER ROUND OF QUANTITATIVE EASING IN THE US, SOVEREIGN BOND YIELDS IN THE PERIPHERAL EUROZONE COUNTRIES (Greece, Ireland, Portugal, and Spain) were already edging up. Yields shot up from October 28, when German Chancellor Angela Merkel called for private bondholders to accept some losses as part of a future Eurozone bailout and debt restructuring mechanism. However, bond yields had started ed.....

DATA INSIGHT | November 15, 2010

Figuratively Peaking: Power sector fuel choice appears flexible even during periods of peak demand

SINCE EARLY LAST YEAR, FUEL SWITCHING IN THE POWER SECTOR HAS CEMENTED ITS ROLE AS THE LARGEST AND MOST DYNAMIC SWING FACTOR in the US natural gas market. Futures markets are pricing in the continuation of widespread switching for at least the next two years, but due to the complexity of the switching phenomenon, it remains the least understood major driver of gas fundamentals. The novelty of a significant shift in the power sector’s fuel mix has given rise to several esoteric – but important… .......

SPECIAL REPORT | November 05, 2010

An encore performance? The prospects for another early-winter natural gas inventory surprise

IN EARLY DECEMBER LAST YEAR, A FUNDAMENTAL SURPRISE SNAPPED THE US NATURAL GAS MARKET TO ATTENTION. Coming out of a once-in-a-generation bearish summer, December’s first two EIA natural gas storage reports implied that apparent fundamentals had tightened to such an extent that market participants were left groping for explanations just before the holidays. After reaching a bottom of $4.46/mmbtu on December 3rd, the January NYMEX contract rallied 25.6% to just below $6 before expiring at $5.81. … .......

DATA INSIGHT | November 01, 2010

Marginal notes: Fuel switching is changing the relationship between power prices and natural gas

AS NATURAL GAS HAS CAPTURED MARKET SHARE FROM COAL IN THE POWER SECTOR, THE FUEL’S ROLE IN POWER MARKETS HAS CHANGED more than can be measured in bcf or MWh. The US power sector has been in flux for much of the past three years; economic weakness has dragged on demand while fuel switching between coal and gas has tested the commercial and infrastructural flexibility of regional markets. And as low natural gas prices have kept switching from coal to gas stubbornly persistent, the relationship be… .......

SPECIAL REPORT | October 18, 2010

The Crude Abides: Oil inventories may be high, but they suggest that fundamentals have shifted

THE WORLD'S OIL INVENTORIES ARE UNDOUBTEDLY HIGH; THIS MONTH’S IEA OIL MARKET REPORT ESTIMATED THAT OECD COMMERCIAL STORAGE SET AN ALL-TIME RECORD at the end of August. Sitting just below 2.8 billion bbl, total liquids storage was up ever so slightly over the prior year, suggesting that the oil market has made no progress toward reducing the massive inventory glut that emerged during the global recession. Indeed, measured inventories have remained incredibly high despite preliminary demand read… .......

SPECIAL REPORT | October 05, 2010

Obsessive compulsive drilling: Where the rigs are & why they’re still drilling

Obsessive compulsive drilling Where the rigs are & why they’re still drilling IN THE SUMMER OF 2009, US NATURAL GAS DRILLING PLUMMETED from a peak of 1,617 rigs in October 2008 to a nadir of 672 in July 2009. Since then, the rig count rebounded to 1,004 in mid-September before sliding back to 977 last week. The EIA has anticipated a drop in the rig count for several months given persistent low prices (the 12-mo natural gas strip is currently trading below $4.25/mmbtu for the .....

DATA INSIGHT | September 30, 2010

September 30, 2010

Please find attached the latest LCMC Data Insight: Shoulder-season shifts This EIA natgas report hits at dynamic balances THIS WEEK’S EIA NATURAL GAS STORAGE REPORT INDICATED A +74 BCF NET INJECTION FOR THE WEEK ENDING SEPTEMBER 24, above consensus expectations in the high 60s, the year-ago +65 bcf injection, and the +67 bcf five-year average. The November NYMEX contract immediately plumbed new lows. Even though US average cooling degree days ticked up we.....

SPECIAL REPORT | August 16, 2010

Not So Fast: What the pace of injections suggests about the chances for another natural gas price collapse

OVER THE PAST YEAR, WE HAVE FREQUENTLY POINTED OUT THE PITFALLS OF YEAR-ON-YEAR COMPARISONS IN THE NATURAL GAS MARKET, but they continue to influence market sentiment, causing some observers to expect a repeat of last year's late-summer price collapse. We think that most indications are pointing toward relatively strong cash prices later in the injection season. Whether or not strong cash prices translate into support in the NYMEX market depends upon the relationship between physical and financ… .......

DATA INSIGHT | July 15, 2010

On Holiday: Now is a good time to declare independence from basic year-on-year comparisons

NATURAL GAS STORAGE NUMBERS ARE NOTORIOUSLY HARD TO PROJECT DURING HOLIDAY WEEKS, and today’s EIA report should be no exception. As businesses and factories close, demand for power and natural gas falls short of normal weekday demand. The degree to which the holiday curbs normal demand depends largely on two things: how much economic activity declines and the temperatures during the holiday. The context for this year’s July 4 holiday presents a stark contrast to last year’s on both fronts. But … .......

SPECIAL REPORT | July 14, 2010

A grand reopening? Energy demand's sensitivity to weather is coming back as the US returns to business

SCORES OF FACTORIES AND BUSINESSES CLOSED THEIR DOORS EARLY IN 2009 as the US economy plunged deeper into recession. Chemical factories, steel mills, and coffee shops went quiet. Virtually the entire auto industry shut down in January and again during the summer. We argued at the time that shuttered factories, empty commercial space, and vacant homes would blunt energy demand for heating and cooling. Not only would the recession erode energy demand for industrial processes, but the diminished h… .......