Factors Affecting Natural Gas Prices

Natural gas prices are a function of market supply and demand. Because of limited alternatives for natural gas consumption or production in the near term, even small changes in supply or demand over a short period can result in large price movements that bring supply and demand back into balance. See the June 12, 2012 and April 11, 2014 Today in Energy articles for recent examples.
There are three supply side factors that may affect prices:

• Variations in the amount of natural gas being produced
• The volume of gas being imported and/or exported
• The amount of gas in storage facilities (referred to as storage levels)

Increases in supply tend to result in lower prices, and decreases in supply tend to increase prices.
There are three demand side factors that may affect prices:

• The level of economic growth
• Variations in winter and summer weather
• Oil prices (the effects of oil prices on natural gas prices varies by global region)

Tropical Storm Katrina over the Bahamas and east of Florida, August 24, 2005

Source: NASA image courtesy Jeff Schmaltz, MODIS Land Rapid Response Team (public domain)

Higher demand tends to lead to higher prices, while lower demand tends to lead to lower prices.

Domestic natural gas prices driven primarily by supply

Most of the natural gas consumed in the United States comes from domestic production. U.S. dry production increased from 2006 to 2013, when it reached its highest recorded annual total. The increases in production were the result of more efficient, cost-effective drilling and completion techniques, notably in the production of natural gas from shale formations. See the March 11, 2014 Today in Energy article. Increased natural gas supply tends to lower prices. For example, average wholesale (spot) prices for natural gas fell significantly throughout the United States in 2012 compared to 2011. A mild 2011-12 winter, high natural gas inventories, and rising natural gas production in the Marcellus and Eagle Ford basins contributed to lower average spot natural gas prices at Henry Hub.

Severe weather can disrupt production

Hurricanes and other severe weather can affect the supply of natural gas. For example, in the summer of 2005, hurricanes along the U.S. Gulf Coast shut down about 4% of total U.S. production between August 2005 and June 2006.

Economic growth can affect natural gas demand and prices

The strength of the economy greatly incluences natural gas markets. During periods of economic growth, the increased demand for goods and services from the commercial and industrial sectors generates an increase in natural gas demand. This is particularly true in the industrial sector, which uses natural gas as both a plant fuel and as a feedstock for many products such as fertilizer and pharmaceuticals (see Annual Energy Outlook 2014 Issues in Focus article "Effects of lower natural gas prices on projected industrial production"). The increased demand can lead to increased production and higher prices. Declining or weak economic growth tends to have the opposite effect.

Winter weather strongly influences residential and commercial demand

During cold months, residential, and commercial end users consume natural gas for heating, which places upward pressure on prices as demand increases. If unexpected or severe weather occurs, the effect on prices intensifies because supply is often unable to react quickly to short-term increases in demand. The effects of weather on natural gas prices may be exacerbated if the natural gas transportation system is already operating at full capacity. Under these conditions, prices tend to increase, which reduces overall demand for natural gas. Natural gas supplies that were placed in storage during periods of lesser demand may be used to cushion the impact of high demand during inclement weather.

Hot summer weather can increase power plant demand for gas

Temperatures can also have an effect on prices during the cooling season. About 30% of U.S. electricity is generated by natural gas. Warmer than normal temperatures can increase the demand for air conditioning which increases the power sector's demand for natural gas and can lead to increased prices.

Natural gas supplies held in storage play a key role in meeting peak demand

The overall supply picture is also influenced by the level of natural gas held in underground storage fields. During the heating season, natural gas in storage is a critical supply component. Natural gas in storage helps satisfy sudden shifts in supply and demand, helps accommodate stable production rates, and helps support pipeline operations and hub services. Levels of natural gas in storage typically increase during the refill season (April through October) when demand for natural gas is low, and decrease during the heating season (November through March) when space heating demand for natural gas is high. Natural gas in storage represents a source of supply immediately available to the market. This can counteract the effects of sudden increases in demand for natural gas, or counteract supply disruptions that cause demand to exceed supply and lead to higher prices.

Competition with other fuels can influence natural gas prices

Large-volume gas consumers (primarily industrial consumers and the electricity generation fleet) can switch between natural gas, coal, and oil, depending on the prices of each fuel. Because of the interrelationship among these fuel markets, when prices of the other fuels fall, any shift in demand from natural gas to coal or oil reduces natural gas demand and pulls natural gas prices down. When prices of the competing fuels rise relative to natural gas prices, there may be a cutover from the competing fuels to natural gas, increasing its use and pushing natural gas prices up.
While 39% of electricity was generated from coal in 2013, the use of natural gas for electricity generation has been on the rise, generating 27% of electricity in 2013. Electricity generation using natural gas can become attractive in some areas of the country when the price of natural gas on an energy equivalent basis becomes lower than the price of coal.

Fed more divided on U.S. labor-market gains

Published: Aug 20, 2014 2:20 p.m. ET

JeffryBartash

Reporter

WASHINGTON (MarketWatch) — Top U.S. central bankers say the nation’s labor market is improving faster than expected, but the Federal Reserve is still not convinced it’s strong enough to alter interest rates anytime soon, according to minutes of the bank’s last big meeting in late July.
And in an important step, the Fed has agreed to use interest rates on excess reserves as its main tool to set the federal funds rate in the future.
Senior Fed officials appeared more divided on how rapidly the U.S. labor market is improving at the July 29-30 meeting of the Federal Open Market Committee. The U.S. posted its best six-month stretch of hiring in the first half of 2014, for example, and the unemployment rate recently fell to a six-year low of 6.1%. Read FOMC minutes.
Yet a majority of Fed officials argued the falling unemployment rate has exaggerated how quickly the labor market is improving. They pointed to a still-high number of long-term unemployed and weak wage growth as evidence that much more progress is needed before the Fed considers altering its go-slow policy on short-term interest rates.
The Fed’s policy-setting committee “agreed to state that labor market conditions improved … while also stating that a range of labor market indicators suggested that there remained significant underutilization of labor resources,” the minutes said.
The FOMC voted 9-1 to maintain its current policy of slowly withdrawing stimulus from the U.S. economy. The majority also reiterated the Fed is likely to keep the short-term federal funds rate below what is considered normal for “some time.
Philadelphia Fed President Charles Plosser, the only dissenter, argued that his colleagues underplayed the improvement in the labor market and a rise in inflation toward the banks’ intended 2% target. He warned U.S. financial markets could get disrupted if the Fed had to act sooner than it plans to raise interest rates.
Wall Street might get more clues on the Fed’s intentions when Chairwoman Janet Yellen delivers a speech on Friday in Jackson Hole, Wyo., on why the labor market is not as healthy as traditional indicators would suggest.
Separately, the Fed agreed at its July meeting to use interest rates on excess reserves as its main tool to set the federal funds rate. Excess reserves refers to short-term assets that private banks keep inside the Fed. Banks are keeping an unusually high amount of reserves at the central bank.
The bank also plans to target a range instead of a precise number when it eventually raises rates, according to the minutes. For example, the bank now has a fed funds target of zero to 0.25%. In the past, the Fed would target a single number such as 3% or 4.5%.
As expected, the central bank gave no timetable on when it expects to start raising the fed funds rate. Most analysts believe the Fed will wait until mid-2015 or so.

World Awash in Oil Shields Markets From 2008 Price Shock

By Lynn Doan, Grant Smith and Moming Zhou  Aug 13, 2014 6:50 AM ET  

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Photographer: David Paul Morris/Bloomberg

Retail gasoline in the U.S. has dropped 22.2 cents a gallon since peaking in April at $3.696.

Related

• Oil Disruption Seen `Greater' on Geopolitical Risk

Fighting across Iraq, Libya, Ukraine and Gaza, and an accelerating economy, should mean higher oil prices. Yet crude is falling.

Six years ago, oil soared to a record $147 a barrel as tension mounted overIran’s nuclear program and the world economy had just seen the strongest period of sustained growth since the 1970s. Now, West Texas Intermediate, the U.S. benchmark price, has traded below $100 for 10 days and Brent, the European equivalent, tumbled to a 13-month low.

What’s changed is the shale fracking boom. The U.S. is pumping the most oil in 27 years, adding more than 3 million barrels of daily supply since 2008. The International Energy Agency said yesterday that a supply glut is shielding the market from disruptions. Bank of America Corp., Citigroup Inc. and BNP Paribas SA concur.

“North America has pushed out an incredible amount of crude oil that it used to import,” Ed Morse, the head of commodities research at Citigroup, said in a phone interview from New Yorkyesterday. “The world doesn’t need that much.”

The U.S. imported 7.17 million barrels a day of crude in May, a 26 percent drop from the same month in 2008, according to data compiled by the Energy Information Administration, the Energy Department’s statistical arm. Foreign deliveries will meet 22 percent of U.S. demand next year, the lowest level since 1970, the agency said yesterday.

U.S. Growth

U.S. gross domestic product will grow 3 percent in 2015, accelerating from 1.7 percent this year, according to the median forecast from 84 economists surveyed by Bloomberg. Job openingsrose in June to the highest level in more than 13 years, firming up the labor market picture for the second half of the year, according to the U.S. government.

The nation’s output is forecast to climb to 9.28 million barrels a day next year, the highest level since 1972, the EIA said. The agency cut its 2014 price forecast for WTI to $100.45 a barrel yesterday from a July projection of $100.98.

Oil markets became more resilient to the threat of global supply disruptions because of “spare capacity” and softer global demand, Francisco Blanch, the head of commodities research at Bank of America in New York, said by phone yesterday. Saudi Arabia, the world’s largest crude exporter, has been very reactive to oil price moves resulting in markets that are the most stable since the early 1970s, the bank said in a report today.

“Growth in oil demand was far outpacing our ability to physically supply oil” in the first half of 2008,Harry Tchilinguirian, the head of commodity markets strategy at BNP Paribas in London, said by phone yesterday. “The price of oil needed to rise promptly to ration demand.”

Speculative Advance

The 2008 price rally was supported by investors pouring money into oil futures as they sought alternatives to stocks. Today, speculative interest in crude is shrinking, Tchilinguirian said. Net-long positions in both Brent and WTI fell to the lowest level in at least six months in the week ended Aug. 5, according to data compiled by the ICE Futures Europe exchange in London and the U.S. Commodity Futures Trading Commission.

“There was a bubble in the market in 2008,” with the view that the world was running out of oil and other commodities, Morse said. “Everything changed soon after 2009.”

Brent crude for September delivery fell as much as 0.6 percent today in London to $102.37 a barrel on the ICE exchange, the lowest price since July 2013. WTI oil fell 3 cents to $97.34 a barrel at 11:33 a.m. London time in electronic trading on the New York Mercantile Exchange, after closing yesterday at $97.37 a barrel.

Global Conflicts

Violence flared in Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, in early June as Sunni Islamist militants captured towns in the northwest and then pushed toward Baghdad. Clashes between political factions intensified last month in Libya, where oil exports have been choked by political protests.

Israel deployed forces in Gaza last month with the stated aims of quashing rocket fire and destroying dozens of infiltration tunnels. Tension between Russia and western governments has escalated over President Vladimir Putin’s backing of separatist rebels in eastern Ukraine.

Retail gasoline in the U.S. has dropped 22.2 cents a gallon since peaking in April at $3.696, data compiled by Heathrow, Florida-based AAA show. Prices are at a four-year seasonal low and capped the biggest July drop in six years as the nation’s refiners ran the most oil on record to take advantage of cheap domestic supplies.

Oil Demand

The recent decline in oil prices may prove to be just a phase as global demand is forecast to pick up in the second half of the year, Bhushan Bahree, senior director of global oil at IHS Energy, said by phone yesterday. Demand will rise 1.71 million barrels a day to 93.45 million in the third quarter and climb again to 94.04 million in the fourth, the Paris-based IEA said in a report yesterday.

“There are different moving parts when you go forward, and what we’re expecting now may not play out the same way,” Bahree said from Washington. “I would still think we are going to see more demand and there will be some support for prices.”

Global oil demand grew last quarter at the weakest pace since 2012, helping to calm world markets amid the conflicts, the IEA said in its report. The agency cut estimates for total growth in 2014 by 180,000 barrels a day.

OPEC Supplies

Supplies from the Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil, rose to a five-month high of 30.44 million barrels a day in July as Libyan output recovered and Saudi Arabia increased production, the IEA said.

Industry oil inventories in developed nations swelled in June to their highest since September, the agency said. Stockpiles of crude and refined products in the Organization for Economic Cooperation and Development increased for a sixth month in June, by 13.8 million barrels to 2.67 billion, narrowing their deficit to their five-year average.

“Market participants are obviously fed up with events that are built up as geopolitical risks, but which never realize as material disruptions in supply,” Eugen Weinberg, the head of commodities research at Commerzbank AG in Frankfurt, said by e-mail yesterday. “At the same time the demand growth has been rather disappointing.”

Libyan Oil

Libya loaded the first oil cargo from the port of Ras Lanuf since it was closed by rebels a year ago. The tanker will soon leave port with 680,000 barrels of crude and head to Italy, Ibrahim Al-Awami, the oil ministry’s director of measurement, said by phone yesterday from Tripoli. State-run National Oil Corp. plans to double exports this month.

U.S. oil production is outpacing unplanned outages that cut into global supply, Adam Sieminski, the EIA’s administrator, said by phone from Washington. Global outages affected about 3.2 million barrels a day in July, up from 1.5 million at the end of 2011, he said. U.S. output has meanwhile risen 2.61 million barrels a day since the end of 2011.

“Production is continuing to grow, and in the meantime, global demand is slowing down a little bit and efficiency gains are beginning to have an impact,” Sieminski said. “It’s a very positive story for consumers.”

To contact the reporters on this story: Lynn Doan in San Francisco atldoan6@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net; Moming Zhou in New York at mzhou29@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.netJames Herron, Rachel Graham

Weakest Oil Demand Growth Since ’12 Allays Supply Risk, IEA Says

By Grant Smith Aug 12, 2014 4:00 AM ET

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Global oil demand growth eased to its weakest since 2012 last quarter, calming world markets amid threats to supplies in the Middle East and North Africa, according to the International Energy Agency.
The IEA cut estimates for oil demand growth this year and next after the annual expansion in fuel consumption slowed to 700,000 barrels a day in the second quarter, the lowest level since early 2012. The resulting supply surplus has meant that Libya, seeking to restore crude exports choked off by political feuding, is struggling to find buyers, the agency said in its monthly market report. Logistical constraints in southern Iraq may prove a bigger hurdle to bolstering output than violence in the north, it said.
“Despite armed conflict in Libya, Iraq and Ukraine, the oil market today looks better supplied than expected, with an oil glut even reported in the Atlantic basin,” said the Paris-based agency, which advises 29 nations on energy policy. “The market appears confident that OPEC can deliver the production increase needed from it to meet rising demand expected in the second half of the year.”
Brent crude futures have declined 6.2 percent this year even as an Islamist insurgency flares in Iraq, tensions escalate between the West and Russia over Ukraine, and Libyan exports remain curtailed as political factions battle for control. Brent was at $104.20 a barrel on the ICE Futures Europe exchange in London today.

Forecasts Lowered

The agency reduced estimates for global oil demand growth in 2014 by 180,000 barrels a day following a weaker assessment of the world economy by the International Monetary Fund. Consumption will increase by 1 million barrels a day, or 1.1 percent, this year to average 92.7 million a day.
While demand growth will rebound next year, the pace will be 90,000 barrels a day slower than previously expected because of lower estimates for China and Russia. Global consumption will expand in 2015 by 1.3 million barrels a day, or 1.4 percent, to 94 million a day. Total demand levels for this year are little changed from last month’s projections, while growth is lower because of upward revisions to consumption data for previous years.
The agency’s outlook for demand in the second half of this year is stronger than previously assessed, meaning the amount of crude required from the Organization of Petroleum Exporting Countries will be 30.8 million barrels a day, higher than last month’s estimate. That’s about 360,000 a day more than the organization pumped in July.

OPEC Rebound

Output from OPEC’s 12 members climbed 300,000 barrels a day in July to a five-month high of 30.44 million a day, as Saudi Arabia raised production and supplies recovered in Libya. The Gulf kingdom, OPEC’s biggest member and de facto leader, increased output to 10 million barrels a day, the most since September, the IEA said. Libyan output almost doubled to 430,000 barrels a day.
“The Atlantic market is currently so well supplied that incremental Libyan barrels are reportedly having a hard time finding buyers,” the agency said. “Many in the market seem more focused today on potential short-term downward price pressures from a further increase in Libyan production.”
Industry oil inventories in developed nations swelled to their highest since September, the agency said. Stockpiles of crude and refined products in the Organization for Economic Cooperation and Development increased for a sixth month in June, by 13.8 million barrels to 2.67 billion, narrowing their deficit to their five-year average.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron, Rachel Graham

Global blood plasma market: Key players are Baxter, CSL, Grifols and Octapharma

Global blood plasma market: Key players are Baxter, CSL, Grifols and Octapharma

The global blood plasma market represents a highly regulated to ensure the safety of collected plasma and protect donors. The main key players operating in the global blood plasma industry are Baxter, Grifols, CSL and Octapharma. Competition at both a local and global scale is strong with the industry highly consolidated and controlled which impacts on the dynamics of the market as a whole.

New improved treatments are being developed to address the unmet needs related to blood disorders, autoimmune diseases and liver function impairment such as IVIG, albumin, clotting factors amonst others. These treatments are all derived from human blood plasma.

The fastest developments within the blood plasma industry is focused on the areas such as clinical technology and testing methodology. The report focuses on segmenting the blood plasma market into IVIG, albumin and haemophilia sectors. Regional analysis is also provided focused on US and China markets in particular. Growth drivers, industry developments and key trends are all highlighted in the document.

Data regression models are used within the report to determine the future direction of the blood plasma market and the key drivers impacting growth and development within the industry.

Gasoline Rebounds From Six-Month Low as Inventories Drop

By Moming Zhou and Mark Shenk Aug 6, 2014 12:02 PM ET

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Gasoline futures rebounded from a six-month low after a government report showed inventories of the fuel dropped the most in four months and demand rose. Crude oil was little changed.
Prices headed for the biggest one-day gain since June, widening the profit refineries make from processing a barrel of crude into the fuel. Stockpiles decreased 4.39 million barrels last week, the most since April, the Energy Information Administration said, and consumption over four weeks increased to the highest level since June 13.
“The drawdown in refinery products is impressive and definitely supportive,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Demand for gasoline is strong. It’s a turnaround of the overall situation.”
Gasoline for September delivery climbed 3.95 cents, or 1.5 percent, to $2.755 a gallon at 11:59 a.m. on the New York Mercantile Exchange after sinking to $2.7155 yesterday. The volume of all futures traded was 27 percent above the 100-day average.
West Texas Intermediate crude declined 15 cents to $97.23 a barrel on the Nymex. The contract dropped to $97.38 yesterday, the lowest close since Feb. 5. Trading was 11 percent below the 100-day average.
Gasoline’s larger gain widened the crack spread, a rough measure of the profit from processing a barrel of oil into gasoline, to $18.48 a barrel from $16.67 yesterday. It settled at $16.08 on July 24, the lowest since February.

Brent Gains

Gasoline inventories fell to 213.8 million barrels in the week ended Aug. 1, the EIA, the Energy Department’s statistical arm, said. They reached 218.2 million the previous week, the most since March. Consumption in the four weeks ended Aug. 1 rose to 9.05 million barrels a day.
“The most important thing is gasoline demand,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “The draw is because demand is higher. The margin is coming back.”
Inventories at Cushing, Oklahoma, the delivery point for WTI futures on the Nymex, increased for the first time in a month, up 83,000 barrels to 18 million. A July 29 fire forced the shutdown of CVR Energy Inc. (CVI)’s refinery in Coffeyville, Kansas, which uses supplies from Cushing. The 115,000-barrel-a-day refinery may be shut for four weeks, Chief Executive Officer Jack Lipinski said July 31.

Refinery Rate

U.S. refineries operated at 92.4 percent of their capacity last week, down from 93.5 percent the previous week.
“This was certainly a bullish report,” said Jim Russell, who helps oversee $124 billion as a senior equity strategist at U.S. Bank Wealth Management in Cincinnati. “There was a refinery outage in the central U.S., which helps explain the big drop in gasoline supply. This is temporary but still having an impact on the market.”
Distillate fuels, including diesel and heating oil, decreased for the first time since May, down 1.8 million barrels to 124.9 million. Crude supplies dropped 1.76 million to 365.6 million.
“We had a very significant drop in gasoline stocks and distillate as well,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. “Part of that drop is due to the Kansas refinery that caught fire.”
Brent for September settlement rose 19 cents to $104.80 a barrel on the London-based ICE Futures Europe exchange. It closed at $104.61 a barrel yesterday, the lowest since Nov. 7. The European benchmark crude was at a premium of $7.57 to WTI on the ICE. It closed at $7.23 yesterday.
To contact the reporters on this story: Moming Zhou in New York at mzhou29@bloomberg.net; Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Richard Stubbe