1) The Polar Vortex Effect on Energy Prices: After Polar Vortex 1.0 and 2.0, natural gas storage has started the year off 20% below last year. The Energy information Administration has forecasted the end of season storage (March 31st) at 1, 541 which is below the 5 year min level of 1,591 Bcf. With higher gas prices, gas producers are likely to increase supply and fill storage back to the 3, 800 Bcf level by the start of October.
2) Volatility in Natural Gas Prices: Natural gas basis remains volatile, both in cash and forward markets. In the Midwest, Chicago prices are forecasted to realize near parity with Henry Hub as the market must still source supply from markets in the west and midcontinent that have alternatives to flowing into deeply discounted markets. New proposals to move gas to demand centers continue to emerge, and both producers and end-users are subscribing to capacity to move gas out of the Marcellus and Utica regions and to consumers.
3) The Effect of LNG Exports: It is likely the Department of Energy will approve each LNG export application it considers this year, leaving the ultimate volumes of LNG exports to be determined by global supply and demand fundamentals and not political considerations in Washington. Lake Charles, Freeport, and Cove Point all received export licenses in 2013, and the DOE is likely to continue granting approvals as it works, albeit slowly, down its queue.
4) Industrial Energy Demand: The Energy Information administration Jan 7, 2014 short term energy outlook reported Industrial gas demand is up 2% y-o-y thru October and a 3% growth m-o-m. The industrial sector has been a continued bright spot for natural gas demand and should continue expanding based on the U.S. cost advantage in domestic gas prices vs. global prices.
5) Gas Price Projections: The Short Term Energy Outlook released by the Energy Information Administration on January 7, 2014, Henry Hub prices averaged $3.73/MMBtu for 2013 overall and are projected to average $3.89/MMBtu in 2014 and $4.11/MMBtu in 2015
6) GasExports to Mexico: According to a Goldman Sachs report, natural gas exports from the U.S. to Mexico could more than double by 2015 as demand for natural gas increases in Mexico and U.S. producers try and find a home for excess natural gas.
7) Environmental Rules: Environmental policy will continue to favor a cleaner generating fleet. The Mercury Air Toxic rules survived its court challenges and takes effect as planned in early 2015, while rules on EPA carbon emissions are inching forward.
8) Natural Gas Vehicles: In their Annual Energy Outlook, the EIA is forecasting that natural gas is the fastest – growing fuel in the transportation sector, with an average annual growth rate of 11.9 percent from 2011 to 2040.
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