Emex LLC, a privately-held real-time trading exchange, lowered its forecast for natural gas prices for the rest of 2014 but said it is maintaining a bullish outlook on forward energy prices compared to costs for 2012 and 2013.
Houston-based Emex said Wednesday that it anticipates natural gas prices will range $4.10-4.40/MMBtu for the remainder of 2014 and will have a balance-of-year range going into 2015 of $3.75-4.10/MMBtu. Last May, the firm said it expected natural gas prices to be $4.30-4.70/MMBtu for the rest of 2014.
Emex attributed the lower price range to shifting market conditions, a cool summer in the Northeast and record levels of natural gas being injected into storage. The firm said it had also taken into account current storage levels, historical injection patterns and rig counts in formulating its analysis.
"One of the benefits of deregulated energy markets is the opportunity for customers to take advantage of a favorable change in market conditions," said CEO Todd Segmond. "With recent trends in the energy markets, our clients across the country…have the ability to capture the current dip in the market to effectively mitigate future energy price risk for both electricity and natural gas costs."
Natural gas prices soared to record levels during last winter's polar vortex events and the amount of natural gas in storage plummeted (see Daily GPI, Jan. 21; Jan. 6). Earlier this month, the U.S. Energy Information Administration estimated working stocks of natural gas will reach about 3.43 Tcf by the end of October, about 380 Bcf lower than the year prior (see Shale Daily, July 9).
"The extreme cold put us at a substantial storage deficit at the end of the winter," said Phillip T. Golden, Emex's director of risk and product management. "However, mild temperatures and record production levels have allowed us to refill storage at a breakneck pace and current forecasts suggest that natural gas in storage at the end of the injection season will approach 3.4 Bcf.
"The market is reacting to these strong bearish signals with tumbling natural gas futures prices. Since the end of June, the balance of calendar year 2014 has fallen by roughly $0.50/MMBtu, and strip for calendar year 2015 is off $0.30/MMBtu."
Emex said that despite the current favorable conditions for energy consumers, there remains uncertainty, especially with hurricanes. "The uncertainty of future weather patterns, including the potential for hurricane activity along the Texas-Alabama shore line and an unknown winter forecasts, leave the future of the market uncertain," the firm said.
Earlier this week, forecasters at Weather Services International (WSI) predicted a mild hurricane season for 2014 (see Daily GPI, July 23a). Likewise, the National Oceanic and Atmospheric Administration said this year's hurricane season would be mild, thanks to an El Nino event in the Pacific Ocean in August (see Daily GPI, May 22).
An analysis by NGI this week shows the trend of falling price expectations that began in July is likely to continue into August. That analysis is based on a forecast released Monday by WSI, which predicted cooler-than-normal temperatures in the Northeast in August, followed by a warmer-than-normal autumn (see Daily GPI, July 23b; July 21).
Last week, BNP Paribas lowered its natural gas price outlook for 3Q2014 to $4.05/Mcf, citing increased supplies and less summer demand than expected (see Daily GPI, July 18).
Emex operates a reverse auction service for natural gas, and serves commercial, industrial and municipal customers in 12 states and the District of Columbia. Its website lists 41 natural gas customers, includingNICOR, National Grid, Washington Gas, Consumers Energy, DTE Energy, PSE&G, Consolidated Edison, National Fuel, National Grid, Columbia Gas, Dominion East Ohio, PECO and Philadelphia Gas Works.