Energy Metro Desk Sept. 27, 2013

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around the desk (regular eature)

editor ’s energy market commentary power movescommentary by Dr. Robert Michaels

emissions desk power signals weekly gas storage lotto & market buzz weather desk hurricane season a wash; winter looking ‘normal’ wsi early winter view indices, benchmarks, access and airness

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table o contents

September 27, 2013

mailto:[email protected]






aound the desk By John Sodergreen, editor in chief

(Continued)

Lots o News Aound the Desk This Week…

Manuacturing output slowly and steadily torques up, according to the Fed, though it

hasn’t translated into any discernible im-

pact on the natty-gas demand picture (but

we’re hopeul) … EIA retools its rules or

gas storage reclassications (and there was

much rejoicing) … the House introduces

roughly 490 irrelevant bills in a matter o

our days… New, bigger penalties and nes

or banks and unds and other players act-

ing badly continue to march orward. JPM

is now considering whether to pay $11 bil-

lion in nes or improper whale-watchingand ICAP is hit with a huge ne or LI-

BOR mischie, just to name two biggies

this week. The CFTC also announced an-

other dozen or so enorcement actions

against smaller players this week. Federal

Enorcement oces are having a eld day

these days, it seems. More bad guys getting

dinged all the time. The nes are bigger

and more requent. Are markets saer be-

cause o it? One would hope so. But,

there’s no way o knowing. What we are

certain about is that the cost o makingthese markets sae or investors and other

living things has come with a huge price

tag. Maybe, too big. We realized that we

spend an awul lot o time talking and writ-

ing about compliance requirements or u-

tures industry players. Maybe more so than

talking and writing about the energy u-

tures industry on the whole. Hmm. We

read a commentary this week by IFR

(Thomson-Reuters) editor-at-large Keith

Mullin that tossed around some regulatory

compliance numbers which seemed, well,outrageous. Somebody needs to remind

our well-intentioned regulators that, hard

as you might try, you can’t regulate away

every ounce o bad behavior. It’s clear,

though, that rule writers at 1155 21st St.,

NW in DC are giving it the old college try.

“The regulatory discourse and its direction

o travel in the ve years since Lehman

Brothers’ collapse have clearly been driven

by vindictiveness and a morbid longing or

revenge, but they’ve created a monster.

The massive body o regulations has turnedbanks into massive, bureaucratic mega-ma-

chines with a regulatory apparatus that has

become ultra-litigious and predatory…”

There’s an ugly image. Mullin agrees that

the industry was ripe or reorm, “but

we’ve moved ar too ar in the direction o

over-regulation. Investment banks are be-

coming unctionary-heavy actories….”

Ouch. So, what about the big JPM ne?

What will company chie Jamie Dimon in-

troduce next to the “best run bank on Wall

Street”? The Wall Street Journal reportedthat the bank would spend an extra

US$4bn and put a staggering 5,000 addi-

tional people on the case to x risk and

compliance issues, including 3,000 in risk

control and 2,000 extra compliance people

assigned to the lines o business. “And that

is on top o the thousands already engaged

in this task but who are clearly ailing to hit

the high points. That US$4bn number

breaks down into US$1.5bn or managing

risk and regulatory compliance and an ad-

ditional US$2.5bn to litigation reserves.”Mullin notes that rom Q1, 2012, the bank

had already spent roughly $3 billion on ac-

crued litigation expenses. He also listed

similar gures or CITI, BoA, MS and

Goldman, Barclays, HSBC, and Deutsche

Bank. We know this drill well enough.

We’re thinking that, in the end, customers,

and not shareholders will suer most. But,

we digress. Closer to home, we gure once

the oil price manipulation investigations re-

ally kick into gear later this year, on both

sides o the pond, then we’ll really start tosee some seriously big “unintended conse-

quences” related to additional compliance

and risk management investment in our

sector. Oddly, we have the sense that regu-

lators are not moved by any o this. “Cry

me a river,” seems to be a common rerain.

We might have agreed with this a couple

years ago. But, ve years ater the all? We

read a commentary recently in the Jon Lo-

thian Newsletter that made good sense to

us. “In less than two weeks, the CFTC will

require compliance with its nal rules re-garding swap execution acilities (SEFs),

and there is concern among industry par-

ticipants that the budding SEF world is not

ready. We believe these concerns are real

enough and the risks great enough to war-

rant a two-month extension to allow SEFs

and their customers time to complete reg-

istration processes, digest the thousands o

pages o SEF applications, and complete

additional system checks...” We don’t al-

ways agree with Lothian’s views on markets

or associated regulations meant to managethem, but, we’ll make an exception this

time. Quite oten we nd ourselves on the

side o Commissioner Chilton, as he or-

ever presses to move all this arcane stu

orward. When it comes to SEFs, however,

maybe it’s time or one more short pause

beore ull compliance regs kick into gear.

Particularly in light o several last-minute

changes (signicant changes no less) in the

nal drat o the rule, which olks never

heard even a whisper about in the near-nal

rule drats. Footnote 88 is what Lothiannoted, the bit that said, “Any platorm o-

ering aggregation to multiple participants

(a “many-to-many” platorm), must regis-

ter as a SEF even i the platorm has no in-

tention o oering swaps subject to the

trade execution requirement in Dodd-

Frank...” Seriously? We can think o hal a

dozen small platorms in the energy space

that had no intention o becoming a SEF,

who now must do more than think about

it. We say, at least a 60-day delay is war-

ranted here. We wondered i the CFTChad actually alerted certain previously non-

registered participants to this change. Or, i

they’d simply be eventually alerted to it by

way o the Oce o Enorcement? With

just a couple days to go beore the Oct. 2

deadline, both Chilton and O’Malia have

publicly called or a delay to the loomimg

deadline. This week, all three SDR’s also

asked or a delay. Word is, smart money is

eyeing a delay announcement Friday ater-

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(Continued)

noon, and it calls or a 60-day delay... We

clipped the ollowing rom Bloomie re-

cently: “The clear risk is that a patchwork

quilt o national and regional rules runs the

risk o becoming unworkable,” says Martin

Wheatley, the chie executive ocer o the

UK’s Financial Conduct Authority. He was

speaking at a local conerence on the im-

portance o US/EU rule harmonization,

in particular on the central clearing re-

quirement or derivatives. He says the

threat that this whole process could still

become an unworkable mess is real. Still?

“There’s also the linked danger that i ev-

ery national regulator ollows suit, you

soon create a tit-or-tat environment where

any one transaction, or participant, could

easily be subject to three, our or ve dier-

ent regulatory regimes,” said Wheatley.

Seems to us this is an odd ear, rom too

senior an ocial, at this late date. Perhaps

Lothian was wrong ater all... maybe a 60-

day delay on the SEF rule isn’t long

enough... Whispers around the quad sug-

gest that GG has gotten the message… de-

lay on SEF stu is denitely on the table in

advance o next month’s deadlines…In

other news, it was conrmed that the US

has not engaged in any new wars this week,

but, a government shut-down is back on

the table. This week the House purposely

foated a temporary budget package to the

Senate that both sides knew was DOA. The

GOP-dominated House oered a budget

package that included deunding language

or Obamacare. We’re no longer sure what

point is trying to be made. We’re hard

pressed to nd anybody let on either side

o the political divide that seriously cares

about whether we run with the new health-

care laws or not. Worth a government

shutdown? Not even a little bit. Honestly,

nobody cares. There are so many enor-

mously pressing issues at hand, and our

leadership decides to play brinksmanship

on issues the rest o the country has long

deemed back-burner. Thank the gods that

our lawmakers know better than we do.

Certainly the shutdown would shutdown

CFTC and FERC investigations and mar-

ket oversight. Markets wouldn’t close, o

course, but the cops on the beat would be

on holiday. CFTC commissioner Bart Chil-

ton issued an appropriate missive this week

on the situation. “At the stroke o mid-

night, our country will ace a government

shutdown unless a continuing resolution to

und it is adopted. That would be grave

news or consumers. Under a shutdown

scenario, government regulators will be

handcued in our ability to go ater crooks

who are trying to evade our oversight and

protection o markets. You can bet the

“do-badders” are licking their chops.” He

added that “the dark markets that Dodd-

Frank brought into the light o day will go

dark again. The lights will go out. Given

the huge growth in the derivatives industry

and our new oversight o swaps, CFTC’s

market oversight unctions are more im-

portant than ever. Taking our cops o the

beat or even a ew days could have disas-

trous impacts on these markets that con-

sumers depend upon…” True, true. He

added a shout out or industry transaction

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ernment led a lawsuit at the European

Court o Justice this week contesting a pro-

posed (EU) cap on bankers’ bonuses. Re-

call that earlier this year EU lawmakers put

a limit on bonus payments to one year’s

base salary. “These latest EU rules on bo-

nuses, rushed through without any assess-

ment o their impact, will undermine all o

this by pushing bankers’ xed pay up ratherthan down, which will make banks them-

selves riskier rather than saer,” according

to a statement out o the Treasury. “Regu-

lation o pay in this manner goes beyond

what is permitted in the EU Treaty,” the

statement said. The British Bankers’ Asso-

ciation said this month that about 35,000

employees at banks around the world may

be aected… The other big news this week

revolves around the presidents proposed,

new rules or power plants. See our Emis-

sions Desk column or more on that one.Meantime, we read a couple new voter sur-

veys rom Rasmussen Reports on the mat-

ter that may oreshadow how this one

might eventually play out. Recall that Ras-

mussen is more GOP-leaning. Nearly hal

o US voters like the idea o putting tighter

environmental controls on new and exist-

ing power plants, but just as many think

President Obama’s proposed regulations

to do that will hurt the economy. Most ex-

pect those regulations to drive up energy

costs, Rasmussen nds. However, 48 per-cent o Likely US Voters avor new envi-

ronmental regulations to place stricter lim-

its on carbon dioxide emissions rom new

and existing power plants; 34 percent op-

pose these new regulations. Most voters

agree with the Obama administration’s de-

cision to go ahead with tougher controls

on coal plant emissions even though they

recognize it will drive up energy costs. Vot-

ers also view the US coal industry more

avorably than the Environmental Protec-

tion Agency, Rasmussen nds... Finally, theeort to ll the top slot at FERC may have

hit a wall. President Obama’s primary pick

or FERC, ormer CO PUC chairman Ron

Binz may lack the votes or a successul pas-

sage through the Senate Energy and Natu-

ral Resources Committee. White House

Spokesman Jay Carney made a pitch or

Binz earlier this week when news suraced

that besides usual GOP detractors on the

committee, Sen. Joe Manchin (D-WV)

joined the ray, stating that he could not

support the president’s nominee. Manchin

said that, “Mr. Binz’s actions prove that he

prioritizes renewables over reliability. His

approach o demonizing coal and gas has

increased electricity costs or consumers. “I

believe Mr. Binz’s record is unacceptable

or a FERC chairman,” he said. He addedthat he thought Binz’s leadership “will

threaten the reliability o our grid, (and) ir-

reparably damage the coal industry.” Yikes.

No vote has been scheduled. Speaking o

no new nominations and no votes sched-

uled elsewhere, the reported nomination

o GFI exec Chris Giancarlo to ll ormer

CFTC commissioner Jill Sommers’s GOP

slot is still in a holding pattern, according

to sources. His name continues to be at the

top o the list (a very short list apparently),

but, the list isn’t even on the table at the

moment. For that matter, a decision on

Bart Chilton’s seat at the big bench –

whether he gets another term or not – isn’t

any closer to being decided than Giancar-

lo’s slot. What has changed, apparently, isGG’s current trajectory. He ain’t leaving

any time soon, apparently. So much or a

post-summer-vacation surprise. That being

the case, why would he push or seating an-

other GOP commissioner or, or that mat-

ter, altering the current democratic make-

up? We wouldn’t. And so, there it is...

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I you haven’t been ollowing the prog-

ress o the Energy Savings and Industrial

Competitiveness Act o 2013 through the

Senate you’re missing a great policy de-

bate. Only the debate is over the Keystone

Pipeline and the congressional exemption

rom Obamacare. Better than hal o the

Congressional Record on the bill is de-

voted to amendments on those topics. The

bill itsel is being advertised as an example

o increasingly rare bipartisan legislation,

which seems to be its main selling point.

The authors are New Hampshire democrat

Jeanne Shaheen and Ohio republican Rob

Portman, supported by dozens o lobbies

ranging rom the National Association o

Manuacturers to the Natural Resources

Deense Council

The handouts at stake aren’t very

big, but bipartisanship means that they will

be widely distributed. The Department o

Energy will consult with manuacturers

about on-site improvements and subsidize

purchases o high-eciency electric mo-

tors and transormers. There’s no evidence

o a talent shortage, but universities and

nonprots will get money or programs in

energy-ecient building design. State gov-

ernments will probably get unds under a

“Race to the Top” amendment that tells us

a lot about how Washington envisions the

top. States can apply or an “electrical and

thermal productivity challenge.” Each o

the 25 (that’s right) winning governments

gets a ew million dollars, in return or no

more than a uture report.

It’s attractive legislation because

lurking behind every paragraph is an un-

spoken assumption that American busi-

nesses don’t really know what to invest in.

The heart o the bill gives DOE the role

o a guide, using industry standards to as-

semble energy-ecient model building

codes. The problem is that it can’t orce

state and local governments to adopt them,

a statement made numerous times by Sha-

heen and Portman. DOE will, however,

gain the ability to nag those governments,

with an appropriation o $200 million to

“incentivize and assist” them. States (and

Indian tribes) will get two years to certiy

compliance and prove that they have saved

energy. But nothing o consequence awaits

non-compliers, who may become eligible

or additional grants.

The sole available estimate o the

bill’s benets comes rom the American

Council or an Energy Ecient Economy,

which estimates that the building code

program will generate an undiscounted

$40 biillion in savings on gas and electric-

ity rom 2012 (?) to 2023. The calculations

are based on such conjectures as those

predicting that, between 2015 and 2020,

model code adoption will grow rom 10

percent to 80 percent o the states, and

that new codes in 2021 will cut the gure

to 35 percent ollowed by a ve-year rise

to 75 percent. ACEEE only calculated

energy cost savings, while declining to net

the saved $40 billion against the added

costs o new buildings and equipment. It

did, however, perorm the dicult eat o

estimating that the Race to the Top would

generate savings o $11.8 billion. How it

arrived at this gure when proposals have

yet to be written is at best unclear.

Just about every proposed piece

o energy legislation comes with an esti-

mate o the jobs it will create, and this is

no exception. ACEEE’s airly standard

input-output model coughs up an esti-

mate o 66,000 jobs created by the basic

bill between now and 2020. Most o these

models calculate job-years, so this is prob-

ably the equivalent o 6,600 jobs o ten

years’ duration. ACEEE does not men-

tion that its model contains one important

eature that is present in most others: the

algorithms ensure that its only mathemati-

cally possible “nding” is job creation. In

the real economy money spent to comply

with mandates becomes unavailable to

spend on other stu, and the producers o

the other stu (located all over the globe)

lose income and jobs. (ACEEE’s “net jobs

created” is not adjusted or most o these

losses.)

So we are let with a near-classic

pork barrel, whose main reason or ex-

istence seems to be that a rare bipartisancoalition may actually pass it and give Con-

gress something to brag about – something

that hardly anyone really cares about. I this

isn’t why the bill really exists, what other

explanation works? I’m still looking or un-

noticed provisions whose consequence will

be a required ederal building code.

Bob Michaels is a proessor o eco-

nomics at Caliornia State University,

Fullerton, and an independent energy sec-

tor adviser. Michaels works with some o the

country’s leading energy companies. A noted

speaker, energy sector analyst and a regular

Energy Metro Desk columnist, Michaels can

be reached at [email protected] .

powe movesOriginal market commentary by Dr. Robert Michaels

The Efciency Pok Bael





emissions desk

Ronald Coase, the Nobel Prize-winningeconomist whose market theories gave rise

to emissions markets, passed away Septem-

ber 7 at the age o 102. Prior to his 1960

article “The Problem o Social Cost,” the

consensus was that the market could not

create the most economically ecient out-

come due to the sel-interest o its partici-

pants. For instance, economic sel-interest

meant a power plant whose emissions led

to air quality problems would ail to ac-

count or the social cost; in this case, the

impacts on the health o local residents.Beore Coase, the consensus was

that such externalties o business were best

dealt with through a government tax that

converted them to internalties; that way,

the social costs o the emissions become a

part o the rm’s sel-interest in reducing

its tax burden.

But the economist argued that

the competitive market could impose such

discipline more eectively than taxation,

provided it properly accounted or the

transaction costs. The economic disruptiono transaction costs could be smoothed by

replacing the need or endless bilateral ne-

gotiations with a system o clearly dened,

readily transerable property rights, such as

the right to pollute. No matter who owned

that property right, the market could bal-

ance the cost o releasing emissions to pro-

duce energy against the benet o reducing

them or public health reasons.

Here’s how he described the idea,

known as the Coase Theorem, to Reason

magazine in 1997: “Whether someone isliable or not liable or damages that he cre-

ates, in a regime o zero transaction costs,

the result would be the same. Now, you

can expand that to say that it doesn’t mat-

ter who owns what; in a private enterprise

system, the same results would occur.”

Though his theory was used to

established successul SO2

and NOx

mar-

kets to address acid rain concerns in the

1990s, Coase’s opinion o pollution re-

mains salient or racking, greenhouse gas

emissions and other current energy issues.“The pollution problem is always

seen as someone who was doing something

bad that has to be stopped. To me, pol-

lution is doing something bad and good.

People don’t pollute because they like pol-

luting. They do it because it’s a cheaper

way o producing something else,” he told

the magazine. “The cheaper way o pro-

ducing something else is the good; the loss

in value that you get rom the pollution is

the bad. You’ve got to compare the two.

That’s the way to look at it. It isn’t the way that people today look at it. They think

zero pollution is the best situation.”

While his theory has been invalu-

able in setting emissions policy, the British

economist was not an advocate o regula-

tion. “What we discover is that most regu-

lation does produce, or has produced in

recent times, a worse result. But I wouldn’t

like to say that all regulation would have

this eect because one can think o circum-

stances in which it doesn’t,” he said.

When asked or an example o bad regulation, he replied: “I can’t remem-

ber one that’s good… There were so many

studies, and the result was quite universal:

The eects were bad.” He attributed this

to a government grown so massive that it

produced negative marginal returns.

***

Such insights are germane as the Obama

administration rolls out its new regulations

on greenhouse gas emissions rom power

plants. The proposed New Source Peror-

mance Standard (NSPS) would cap emis-sions rom new gas-red plants at 1,000

pounds o CO2

emission per megawatt-

hour. The cap would be 1,100 lb/mWh

or new coal-red plants, or an optional

tighter limit i emissions are averaged over

several years.

EPA Administrator Gina Mc-

Carthy said the proposed regulations are

a common sense limitation on emissions

rom new-build power plants. She led o

by stating the climate change is a major

public health challenge, a key componentto its regulation under the Clean Air Act.

She also said new standards would spark in-

novation by requiring the next generation

o power plants to burn cleaner.

The proposal is a revision o last

year’s standards based on more than 2 mil-

lion comment letters. “We considered new

data and we took a look at recent trends in

the power sector,” McCarthy said. “We are

condent that the carbon pollution stan-

dards are fexible and achievable… The stan-

dards set the stage or continued public andprivate investment in technologies like car-

bon capture and sequestration (CCS). With

these investments, technologies will eventu-

ally mature and become as common or new

power plants as scrubbers have become or

well-controlled plants in generation today.”

She indicated that similar regula-

tions or existing power plants would be

unveiled next June.

***

The EPA chie’s mention o carbon cap-

ture and sequestration technology as anoption or meeting new emissions restric-

tions put the beleaguered coal industry’s

nose out o joint. Coal industry representa-

tives had met with President Obama earlier

this month to push or a 1,900lb/mWh

limit and to deter talk o reliance on CCS.

Requiring implementation o CCS is unre-

alistic, the industry says.

The administration bases its be-

lie in the viability o CCS on two projects

that “are admirable or attempting to ad-

vance the technology (but) neither o themhas demonstrated that the technology is

commercially viable,” according to the

American Public Power Association.

The SaskPower project in Canada

and the Plant Ratclie project in Kemper,

MS, both sit on oil elds, “the only ar-

eas where CCS has been demonstrated to

work,” APPA says. “Locations such as these

that are suitable or the injection o CO2

are

very limited within the United States.”

(Continued)



These demonstration projects

also receive government backing, while

a commercially viable project must be -

nanced under its own steam – a high-risk

gambit or an unproven technology, the

industry group says. What’s more, “The

EPA has ailed to answer the very impor-

tant questions o regulatory treatment and

liability or CO2

once it has been captured

by a plant.”

APPA says the proposal, by re-

quiring use o unproven technology, eec-

tively takes coal o the table as an option

or new-build power plants and orces a

reliance on natural gas, “which is already

stressed as a uel source.” No coal op-

tion could mean higher energy prices, the

group says.

***

The CCS conversation has not been helped

by the announcement that Norway is shut-

Congestion Tends Ove Time At this year’s EUCI FTR conerence, our own Chris Gibbons presented a number o interesting trends in the FTR markets. We

thought we’d use this week’s piece to share one o the more interesting bits. We started by summarizing quarterly congestion rev-

enues (in millions o dollars by quarter). Then we normalized by average load to help even out the dierences in ISO size. The result

is the chart below. It’s pretty busy but really interesting. The numbers denitely bounce around a lot. You can see that, historically,

PJM was consistently among the most congested, but recently they are at a rate that is one-third o their 2008 values. And in 2012-

2013 PJM has been on par with (and oten lower than) MISO, ERCOT, CAISO and NYISO. You can see the dierence between the

NYISO and NEISO. Both are on the smaller side in terms o load, but NYISO has a high rate o congestion whereas NEISO has a

low rate o congestion. However, back in 2008 you can see that the NEISO rate o congestion was comparable to the rate o conges-

tion or several other markets today. Those are some highlights. I want to really dig into the details, check us out at www.yesenergy.com .

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ting down its CCS demonstration project.

Government plans to begin ull-scale CCS

at the Mongstat oil renery were shuttered

last week as costs continue to rise and de-

lays lengthen. “At both the national and

international level, the development o

technologies to capture and store CO2 has

taken longer, been more dicult and more

costly than expected,” Norwegian Oil and

Energy Minister Ola Borten Moe said.

http://www.yesenergy.com/

















The results are in, olks, and we have a

new Champion Natural Gas Forecaster

or Q3, 2013. And, he’s no stranger to

the Energy Metro Desk Winners Circle.

For Q3, 2013, Gabe Harris o WoodMac

bested 40 other top analysts, models and

surveys in our weekly natural gas storage

boxscores to secure the ultimate prize: Best

Natural Gas Storage Forecaster in North

America or Q3, 2013. This amounts to

some serious bragging rights; we are the

biggest and oldest storage survey report

in North America. Harris is a past annual

winner and multiple, quarterly winner over

the past hal-decade. Harris’s top score o

75.72 was slightly lower than the Q2 win-

ner (SocGen/76.50), though higher than

Q1 (CITI/74.82) and a couple points

higher than the Q3/2012 champ (SocGen

73.33). In Q1, Harris pulled a 20th out o

40 and in Q2, 13th out o 40.

This quarter, we had quite a re-

shufing o the Top 10 and the Top 20.

It was a tough quarter or accuracy, but

certainly not the toughest this year. That

dubious distinction goes to Q1, where the

average weekly misre was a whopping 8.5

Bc! In case you’re keeping track, March,

2013 was the worst month or orecasters

to date – the average EIA/market consen-

sus misre was 9.75 Bc. The second-worst

month or orecasters was January – the av-

erage miss by orecasters was 9.2 Bc.

Across Q3, (13 reports) the av-

erage miss or the market each week was

5.15 Bc; that is, the market misred either

higher or lower than the EIA report, on

average, over 5 Bc each week. September

averaged a 5.25 Bc dierence; August

averaged 6 Bc o the EIA report each

week; and July was best at 4 Bc. Q2 scores

proved slightly better: The average misre

between the market and EIA was 4.3 Bc

each week. June averaged 5.5 Bc; May was

4 Bc and April came in low at 3.5 Bc.

Coming in solidly second this

quarter we have LCM Commodities at

74.84; LCM also pulled a very respect-

weekly gas stoage lottoand maket buzz

(Continued)

Q3 2013Final BoxScores Tally

Storage Forecasts 3Q Score

Harris/WoodMac 75.72

LCM Commodities 74.84

Bentek - Flow 74.73

Haidari/Thom-Reuters

Analytics 74.23

Scott Speaker/JPM 72.11

Belfower/Mustang Fuel

Corp 70.53

Global Nat Gas Analytics 69.96

TFS/Tradition Energy 68.58

EMD All Stars 68.38

Tony Yuen/CITI Group 66.53

PIRA 66.45

Fenner/Macquarie Energy 66.31

Larsen/LCI-OPIS 65.71

Banks Index 64.86

Metro Desk Consensus

Avg. 64.56

Reuters Survey 64.07

Tameron/Wells Fargo 63.99

Genscape 63.91

Dow Jones Survey 63.58

Independants Index 63.43

Schneider Electric 63.18

Cooper/IAF Advisors 63.01

Surveys Index 62.48

Steve Gregory 62.27

Revielle/Credit Suisse 61.56

Asset Risk Management 61.23

Woz/ICAP 60.67

Friesen/SocGen 60.24

Smith/Enercast Financial 60.16

Platts Survey 60.03

Norse Gas Marketing 59.87

Bloomberg Survey Avg. 59.87

Robry825 (05) 59.19

“APDM” 59.07

Andy Weissman/EBW 58.64

Featherston/UBS 58.46

Metro Desk Editor Forecast 56.25

SNL Energy Survey 56.09

Adkins/Raymond James 50.91

Sharp/Huntsville Utils 50.43

Marrin/SNL Editor 48.81

Bentek - S/D 47.30

Tim Evans/CITI Futures 45.98

Fitzpatrick/Kilduff Report 41.62

able #5 in Q1. Last year, same quarter,

LCM was #12. At #3 or Q3, we see the

Bentek Flow Model (74.73) – it’s been

a good year or the Big B’s Flow Model

– but not all its models. In Q1, the Flow

Model pulled a #3 and in Q2, #11. At the

moment, the Bentek Flow Model is in the

top slot or the year. Oddly enough, the

Bentek S/D Model is currently near the

bottom at #38. In Q2, the S/D Model

was middling at #15 and in Q1, also low

at #35. Last year, same time, the Bentek

S/D Model was also near the bottom at

#35, while the Flow Model was a solid #5.

Moving on, at #4 or this quarter is Reza

Haidari o Thomson-Reuters Analytics at

74.23; and the #5 slot goes to JPM’s Scott

Speaker (72.11), a past, annual and multi-

quarter winner, as well. Paul Belfower o

Mustang Fuel was our #6 or Q3 at 70.53;

and #7 or Q3 is a relatively new member

o the BoxScores raternity, Global Nat Gas

Analytics at 69.96. At #8 or the quarter

we have TFS at 68.58. In Q2, TFS pulled

#7. At #9 we have the EMD All Stars Fore-

cast – new this year, the All-Stars orecast is

the average orecast o six o our top par-

ticipants over the past ve years. In Q2, the

All-Stars were #12; and, in Q1, they came

in #4. At the moment, the All-Stars are #3

or the year. At #10 or Q3, 2013, we have

Tony Yuen o Citigroup. Yuen came in rst

in Q1, 2013. Rounding out the Top 20,

we have PIRA at #11 (#2 in Q2); Charlie

Fenner o Macquarie Energy at #12 (#8

in Q2); and, at #13, we see Luke Larsen

o LCI/OPIS. At #14 we have the Metro

Desk Consensus – this is only the second

time in as long as we’ve been running these

boxscores that the EMD Consensus was

not in the Top 10. In Q1, 2013, the EMD

Consensus came in 16th. In Q2, however,

the EMD Consensus came in #1. Last year,

same time, the EMD Consensus came in

#6. At #15 out o 40 analysts, models and

surveys, we have the Reuters Survey, ol-

lowed by Team Tameron at Wells Fargo at



Natural Gas Weekly Storage Forecast Comparison 20133rd Quarter

Storage Forecasts 4-Jul 11-Jul 18-Jul 25-Jul 1-Aug 8-Aug 15-Aug 22-Aug 29-Aug 5-Sep 12-Sep 19-Sep 26-Sep

EIA - 2013 72 82 58 41 59 82 65 57 67 58 65 46 87

EIA - 2012 39 33 28 26 28 24 20 47 66 28 27 67 80

EIA - 2011 95 84 60 43 44 25 50 73 55 64 87 89 111

EIA - 2010 78 78 51 28 29 37 27 40 54 58 103 73 74

EIA - 2009 75 90 66 71 66 63 52 54 65 69 66 67 64

EIA - 2008 89 104 84 68 65 51 82 102 90 63 65 54 87

Storage Forecasts 3Q Score YTD Score 4-Jul 11-Jul 18-Jul 25-Jul 1-Aug 8-Aug 15-Aug 22-Aug 29-Aug 5-Sep 12-Sep 19-Sep 26-Sep

Harris/WoodMac 75.72 68.82 69 75 65 40 56 83 68 61 64 57 69 50 79

LCM Commodities 74.84 69.57 72 82 63 37 53 82 67 60 61 51 69 52 84

Bentek - Flow 74.73 73.20 74 83 66 42 55 81 67 60 62 54 74 47 86

Haidari/Thom-Reuters Analytics 74.23 61.85 69 82 62 44 51 83 65 64 63 53 69 49 82

Scott Speaker/JPM 72.11 68.35 72 81 65 42 53 79 67 60 61 56 71 53 79

Belfower/Mustang Fuel Corp 70.53 68.18 71 81 63 41 66 81 74 64 61 54 65 57 80

Global Nat Gas Analytics 69.96 70.81 74 82 64 43 54 81 68 62 63 55 70 56 78

TFS/Tradition Energy 68.58 69.38 73 81 68 47 54 81 70 65 64 59 67 54 78

EMD All Stars68.38 70.57 73 80 68 43 54 80 68 61 62 54 70 51 81

Tony Yuen/CITI Group 66.53 67.80 73 77 69 44 59 83 68 61 60 52 70 47 n/a

PIRA 66.45 69.99 76 79 72 40 52 81 67 62 62 56 65 52 77

Fenner/Macquarie Energy 66.31 68.79 70 83 67 45 55 84 68 61 62 51 72 53 84

Larsen/LCI-OPIS 65.71 60.06 78 77 68 47 51 78 66 62 63 58 66 49 78

Banks Index 64.86 67.96 73 82 67 47 54 79 69 64 63 54 69 54 77

Metro Desk Consensus Avg. 64.56 67.88 73.4 80.4 67.3 45.5 54.6 78.6 69.0 65.4 63.4 54.6 68.2 54.0 78.2

Reuters Survey 64.07 61.93 71 82 64 46 56 77 70 69 63 54 66 56 76

Tameron/Wells Fargo 63.99 65.59 76 85 70 41 57 73 68 60 64 53 75 52 84

Genscape 63.91 62.78 72 72 70 48 61 93 83 62 65 55 66 56 85

Dow Jones Survey 63.58 65.32 70 82 64 47 57 78 71 69 63 55 67 57 77

Independants Index 63.43 67.15 74 79 68 45 55 78 70 66 64 55 68 54 79

Schneider Electric 63.18 58.62 67 78 60 39 59 74 74 75 68 54 65 59 81

Cooper/IAF Advisors 63.01 64.88 75 78 68 43 49 80 67 62 62 53 66 51 77

Surveys Index 62.48 64.21 72 82 66 47 55 77 70 69 63 55 67 57 76

Steve Gregory 62.27 69.16 70 81 69 40 55 80 70 68 60 52 71 49 84

Revielle/Credit Suisse 61.56 65.98 75 n/a 64 44 54 81 71 64 57 56 72 54 81

Asset Risk Management 61.23 58.45 76 75 75 46 54 79 69 64 63 60 64 55 83

Woz/ICAP 60.67 61.18 77 82 72 44 59 n/a 72 63 60 53 67 52 80

Friesen/SocGen 60.24 66.76 74 82 70 49 57 77 68 62 58 54 69 54 n/a

Smith/Enercast Financial 60.16 65.05 73 82 67 54 61 86 74 69 69 59 73 62 82

Platts Survey 60.03 64.11 72 82 68 49 56 76 70 69 63 55 66 57 76

Norse Gas Marketing 59.87 59.95 76 74 64 44 53 74 64 64 64 54 68 54 75

Bloomberg Survey Avg. 59.87 63.41 74 83 65 46 56 79 70 68 62 54 68 57 76

Robry825 (05) 59.19 62.36 73 84 72 43 56 67 67 63 67 51 72 50 65

“APDM” 59.07 66.12 74 74 68 45 58 81 70 77 68 53 65 53 65

Andy Weissman/EBW 58.64 63.40 76 77 64 45 52 73 67 69 63 53 65 53 79

Featherston/UBS 58.46 63.32 75 80 60 55 50 85 70 75 70 55 65 55 75

Metro Desk Editor Forecast 56.25 62.99 78 77 71 40 51 78 65 72 66 51 69 50 80

SNL Energy Survey 56.09 59.60 74 83 66 47 51 74 70 74 65 56 65 58 74

Adkins/Raymond James 50.91 57.45 75 83 68 52 45 80 75 65 70 60 73 54 66

Sharp/Huntsville Utils 50.43 57.70 70 79 69 49 58 74 70 74 60 57 70 60 79

Marrin/SNL Editor 48.81 51.36 76 85 68 42 54 78 74 69 67 52 70 61 72

Bentek - S/D 47.30 56.95 79 76 74 52 49 79 74 63 69 59 70 58 79

Tim Evans/CITI Futures 45.98 49.29 67 87 67 58 53 69 62 77 67 52 58 62 61

Fitzpatrick/Kilduff Report 41.62 50.43 76 84 68 58 54 64 69 67 59 51 64 59 71

Purple: Independent Analysts Red: National Surveys Black: Dartboard Green: Bank Analysts



#16. At #17 we have Genscape at 63.91;

at #18, we see the Dow Jones Survey at

63.58; and, at #19 we have Schneider Elec-

tric at 63.18. At #20 or Q3, 2013 we have

past (multiple) quarterly winner Kyle Coo-

per o IAF Advisors. He was also #6 in Q1.

This quarter, the “Dart” came in at #31; in

Q2, it came in #16; and, in Q1, the Dart

pulled #9. Last year, this time, the “Dart”

was near the bottom o the pack at #37.

Maybe we’ll switch hands.

***

OK, let’s run the numbers: For the past

two reports, the market has managed to

miss the EIA report by an average o 10

Bc. Yikes. On 9/19 the survey index av-

erage came in at 56.5 Bc while the EIA

reported a build o 46 Bc. Our EMD

Consensus was a bit closer at 54 Bc. Holi-

day eects and lots o sketchy outage- and

production-region data added to the con-

usion, we’re told. Guess so, only 10 out o

39 orecasts came within 5 Bc o the tape

that week. Twenty-nine orecasts came

within 10 Bc, however. Our HighBaller

this week was CITI’s Tim Evans at 62 Bc,

while the LowBaller was the Bentek Flow

Model at 47 Bc. Oddly enough, in the

week that ollowed, these two somewhat

fip-fopped. For the 9/26 EIA report,

Evans was the LowBaller orecast at 61

Bc and the Bentek Flow Model was the

HighBaller at 86 Bc. As it happens, EIA

reported a whopping 87 Bc build, which

more or less managed to cement Bentek’s

status as Top Dog or the quarterly tally.

For 9/26, we noted that only 9 out o 38

orecasts came within 5 Bc o the tape and

27 out o 38 orecasts came within 10 Bc

o the EIA number. Two weeks to orget,

as ar as we’re concerned. In both cases,

we noted that the spread between the

three categories we track was a bit higher

than normal and the range o orecasts was

quite high, as well. We sensed a surprise

both weeks, but had no idea it would be

in the 10 Bc neighborhood. We nailed the

bias in both cases, however. We knew the

9/26 report was going to be beey or a

number o reasons: The weather cooperated

(warmer than last year by hal and warmer

than the ve-year average), production co-

operated (weak), imports and exports were

cooperative (also weak), we didn’t have any

lingering Holiday eects and the nuclear/

total outage picture wasn’t as big as origi-

nally believed last week. The EMD Consensus

came in higher than most surveys at 78.2 Bc

and pointed to high-side risk. Bentek, at 86

Bc this week saw risk to the low side. In our

Wednesday Night Express, we gured an 80

Bc build “shouldn’t surprise; over 85 Bc,

should.” Oh well. So ar, we’ve seen a number

o preliminary orecasts or next week that

bump up against three digits. No kiddin.

In post-report commentary this

week, UBS said that the big build implies

that the weather adjusted S/D balance

loosened materially W-o-W. “We estimate

the weather adjusted S/D has been 2.0

Bc/d oversupplied vs. the year-ago but

balanced vs. the ve-year average over the

last our weeks.” For next week, UBS is

looking or a build o between 85-95 Bc.

Reza Haidari o Thomson-Re-

uters Analytics tells us he cuently sees

“injections above +90 Bc/week ove

the next couple weeks.”

Gabe Harris o WoodMac (at 79

or this week’s report) noted that the 87

Bc build was at the top end o the range o

market expectations and ar more than the

75 Bc ve-year average: “A clearly bear-

ish result. As this came on the heels o a

smaller-than-expected build in the prior

week, there’s some possibility o some tim-

ing issues between the two reporting pe-

riods. Nonetheless, this is a sharp build in

a week with warmer-than-normal tempera-

tures and production losses due to fooding

in Colorado. A clear, bearish surprise.”

Reuters noted this week that i

weekly builds into early November match

the ve-year average pace, inventories will

begin the heating season at 3.794 Tc,

about 3.4 percent below last year’s record

high o 3.929 Tc but about 0.5 percent

above average. It would be the rst time in

ve years that gas in storage will not kick

o the winter heating season at a record

high, Reuters says.

Good news on the rise? The

Federal Reserve reported that total indus-

trial production was up 0.4 percent or

the month o August. The FED scale had

the production measure at an estimated at

99.4, which is 0.4 greater than the revised

July number o 99.0. We’re not sure what

the 99 reers to, but it sounds good. Also,

manuacturing production was up 0.7 per-

cent rom July to 96.0 in August and is up

2.6 percent year-over-year.

ACCELERATE YOUR DODD-FRANK COMPLIANCE

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weathe desk Exclusive Weather Forward Views from WSI, MDA EarthSat Weather and

the Commodity Weather Group

Sure, September was hot. Wanna know how

hot? Bob Haas o MDA tells us that we’re

looking at this month ranking in the top

15 historically since 1950 – more than 10

percent warmer than the 30-year normal

and about 8 percent warmer than the 10-

year normal. No kiddin. But, as they say,

it’s done. What’s next? This week we saw a

trickle o views coming out o the sector or

October and beyond. Warm start to Winter

and a cold end? Sounds amiliar. This path is

somewhat o a norm, nowadays, but the trick

is determining how warm we’re talking, and

how cold. At the moment, “normal” seems to

be the CW, though one analyst we spoke to is

convinced we’ll end the Winter with a record

– a record tally in storage. –the editor

MDA-EarthSat meteorologist Bob Haas

says that as we wrap up September and en-

ter October, the pattern in place will remain

one o very low energy demand. Broad

above to much-above normal temperature

coverage rom the Plains to East Coast,

with a ocus on the North, will signicant-

ly reduce early heating demand, he says.

Near-normal cooling demand will linger

rom the West to South, though at gradu-

ally decreasing levels given the ‘normal’

drop o in temperatures during the Fall

season. “Based on national TDDs, the sum

o gas-weighted HDDs (GWHDDs) and

population-weighted CDDs (PWCDDs),

the rst third o October is on track to

rank within the lowest ve years, histori-

cally, over the same stretch since 1950 – a

sure sign o the expected low energy de-

mand period,” he says. The pattern itsel is

largely Pacic-driven, as the persistence o a

trough in or around the Gul o Alaska will

continue to eed a stream o energy across

the Northern Tier, eectively cutting o

the avenue or potential cold air transport

out o the higher latitudes. “As or Sep-

tember, persistent warmth through the na-

tion’s mid-continent has produced a well

above normal PWCDD total. In act, the

projected total o ~196 PWCDDs ranks in

the top 15 historically since 1950 – more

than 10 percent warmer than the 30-year

normal and about 8 percent warmer than

the 10-year normal.” Haas notes that the

tropics remain quiet, with no immedi-

ate signs o late activity, “at least in terms

o meaningul impacts to Gul o Mexico

production or the East Coast o the US. In

the Atlantic Basin to date there have been

nine named storms, only two o which in-

tensied to hurricane strength and none

o which posed any realistic threats. While

these numbers might still increase a bit

through October, as they normally do, sig-

nicant risks rom any uture systems gen-

erally tend to increase as the month wears

on.” For more inormation on MDA’s many

energy-ocused weather products, go to www.

mdaus.com .

***

Matt Rogers of Commodity Weather

Group in Bethesda, MD, tells Energy Met-

ro Desk that a te seeing above-nomal

demand o the fst 2/3 o Septembe,

the stoy has shited to a low-demand

situation, with wame, midwesten and

easten weathe in late Septembe and

ealy Octobe now eating into typical

ealy season heating demand. “The nal

EIA week o September is ranging about

6 percent lower than the ve-year mean,

while the rst two EIA weeks o October

are currently estimated to run 18-20 per-

cent below the ve-year mean or com-

bined, early-season heating and late-season

cooling demand. The weather models are

showing their typical increased volatility

or the shoulder season, which does reduce

orecast condence, but most o the time,

the guidance is oering a bearish pattern

view. The Atlantic tropics are very quiet

and this year could be the rst since 1994

with zero major (Cat 3+) hurricanes,”

Rogers says. For more inormation, go to

ww.commoditywx.com .

***

Meteoologist Dan Leonad o WSI

tells us that the main stoy ove the

next seveal days will be situated acoss

the westen US, whee a vey Winte-

esque patten continues. “There are a

couple more Pacic ronts in the pipeline,

poised to move onshore into the NW dur-

ing the early and middle part o next week.

No, these ronts won’t be as strong as

this weekend’s system (very cold/stormy

here Saturday and Sunday) but will pack

enough o a punch to keep temps below

normal and precip above normal. We are

certainly getting a head start this year on

snowpack in the Cascades and Northern

Rockies; several eet is likely in the highest

terrain beore the jet weakens on Wednes-

day or Thursday. It will be interesting to

see whether this is the prevailing theme or

the rest o the Fall – Pacic ronts end up

considerably stronger/deeper than they

looked outside o Day 8,” he says. Late in

the week a coastal ridge will nally rebuild

and temps will jump, he adds. San Fran has

a chance to break 80 degrees next week as

surace winds shit to the North. Wamth

will gadually expand ove inteio aeas

with most cities jumping above nomal

ove the weekend. Meanwhile, the east-

en hal o the county will emain gen-

eally wam and dy unde boad sub-

topical idging. The wamest days will

be Thusday and Fiday, when many cit-

ies om the Midwest though the Mid-

Atlantic will make a un at 80 degees.

A cold ront will sweep through over the

weekend with a cooling trend, especially

in the plains. However, the air mass will

modiy quickly as it rotates down through

the MidWest, and by the time it reaches

the East Coast early in Week 2 it will have

virtually no cold air let at all. Temps will

merely all back to near normal or a ew

days beore subtropical ridging rebuilds

and brings the warmth back rom West to

East in the 12-to-15 day range. For more

inormation, go to www.wsi.com .

http://www.mdaus.com/


http://www.commoditywx.com/

http://www.wsi.com/

http://www.wsi.com/

http://www.commoditywx.com/





huicane season a wash; winte looking ‘nomal’

“This year’s hurricane season is quickly

becoming one o the ‘quietest’ on record,

with only one minimal hurricane that lasted

little more than a day over the ar eastern

Atlantic,” says meteorologist Steve Greg-

ory. “While sea surace temperatures have

been slightly above normal, the sub-surace

temperatures (10-30 eet down or more)

have been cooler than normal across much

o the GOM and tropical Atlantic – the area

where we typically see a lot o storms orm-

ing. Why this has occurred isn’t very well

known,” he adds. In addition, he says that

unusually stable and dry air has dominated

much o the tropical Atlantic this summer,

and with Fall quickly overtaking the mid-

latitudes, “any storm that does orm has

an ever-diminishing chance o becoming

all that intense or or that matter, impact-

ing the producing region at all, where no

major hurricanes have ever been recorded

ater the rst week in October…”

OK, so add that tidbit to your -

nal-phase storage injection and production

calculations and it looks like we may get a

bit closer to a record build ater all.

“We’ve also had what seems to

be a later season o dry air coming o the

Saharan air layer o Arica. Typically, this

quits around late July or early August. This

year, we’ve seen these hot air surges in late

August and as recently as last week. Most

o the time this comes with a lot o dust,

which together tends to stop all showers

and thunderstorms rom orming,” Greg-

ory says.

You may recall the series o sto-

ries we ran a couple years back on tracking

these massive dust surges coming o o A-

rica and how and why they directly impact

water temperatures in the GOM and else-

where in the Atlantic and urther, how the

varying magnitude o these dust clouds has

a direct impact on the number and inten-

sity o Atlantic hurricanes.

Earlier in the season, Gregory

notes that a number o weather scientists

pointed to a possible La Nina (cold water

in the Eastern Pacic), which tends to en-

hance the number o thunderstorms and

cyclones in the Atlantic in the summer. Ba-

sically the cold water decreases wind shear,

which is a good thing or hurricanes trying

to orm.

“We ended up having a more

neutral (warmer) condition in the Pacic,

which lowered the chance o more storms

in the Atlantic, but increased the chances

o storms in the east pacic. Not many

people considered this an El Nino, since

we would need much warmer surace tem-

peratures than what we saw, but, I’ve been

tracking a lot o warmer sub-surace wa-

ter in the Pacic, which may have pushed

surace temperatures closer to normal, and

thus increase wind shear in the Atlantic. Is

this a direct correlation? It’s not clear yet…

but, the wind shear in the Atlantic has been

above normal and this has denitely cut

down on cyclones orming.”

Looking urther ahead, Gregory

says that due to the current, general lack

o either El Niño nor La Niña conditions

orming any time soon make an extended

outlook or the upcoming winter some-

what problematic. “These conditions basi-

cally control about 60 percent o ‘orecast-

ability.’ A strong event in the pacic, or ex-

ample, makes it somewhat easier to orecast

the Winter season.”

(Continued)

http://www.icapenergy.com/



As such, the recent trend o “ear-

ly warmth ollowed by late cold” seems to

be a popular assumption leading into Win-

ter 2013-2014.

“I believe this is probably what

we’ll see,” Gregory says. “The early warmth

is something we tend to see year ater year,

now. Winters seem to be delayed. So, I see

no reason to believe this will reverse in thecoming Winter,” he says.

Since La Nina and El Nino don’t

exactly orm overnight, and we’re just

about to touch October, where does that

leave us in terms o orecast accuracy? “I

we don’t see a clear cut tendency or either

condition within the next six weeks – or by

November anyway, either warm or cold,

orecast accuracy this Winter will be very

low. At the moment though, my thinking

is or warmer tendencies.”

He says with these major indi-cators out o the picture, orecasters will

instead look at things like general ocean

temps in the rest o the Pacic and Atlantic

or a tendency or a negative North Atlantic

Oscillation (NAO) or a tendency or more

positive readings. “The last ew years it’s

been tending negative or much o the win-

ter, but this doesn’t mean it will continue.”

He says he’s looked back on his-

torical data or years where neither El Nino

nor La Nina conditions had ormed and

ound that the weather was generally “very dynamic.”

“Storms moving west to east very

rapidly were the norm in these non-event

years. We could end up with some very big

storms because o it. Not necessarily a very

warm or cold Winter, but, a very stormy

one. Could be snow or rain, but in any

case, more storms then might be typically

expected.”

He says some corollary years can

be seen around ten years ago, in the 2001-

2003 neighborhood, and beore that ear-lier in the ‘90’s. He says over the past 20

years it’s been airly rare where we had a re-

ally neutral, non-El Nino/La Nina Winter

season.

“This year may actually be neu-

tral. It’s about time in a way…every so o-

ten you need normal, right?”

See Steve Gregory’s daily orecasts

on the Energy Metro Desk website at www.

energymetro.com. Gregory can be reached

at [email protected] .

This week the good olks at WSI released a winter early view that somewhat runs counter

to other early views we’ve read about recently (see above). WSI expects the upcoming all

period (October-December) to be cooler than normal rom the northern Plains into

the Ohio Valley with above-normal temperatures elsewhere, particularly across parts o Texas and the Southwest. WSI Chie Meteorologist Dr. Todd Craword says that due

to the lack o signicant heat in the eastern US this past summer combined with a lack-

luster tropical season have resulted in a relative lack o market-sensitive weather events

compared to recent years. “However, recent trends in both climate models and our

statistical models are becoming more suggestive o a cold start to heating season, es-

pecially by November, across the population-rich areas o the north-central and Great

Lakes states. Further, an early look at indicators or the upcoming winter suggest that

the back hal o winter may be characterized by more widespread cold.” WSI’s rst

look at the November-January period suggests that aggregate natural gas usage or

heating will be up 9 percent year-over-year. For more information, go to www.wsi.com

In Octobe, WSI sees the monthly beakdown as:Notheast*– Warmer than normal

Southeast* – Warmer than normal, except FL

Noth Cental * – Warmer than normal

South Cental* – Warmer than normal

Nothwest* – Warmer than normal, except WA and northern ID

Southwest* – Warmer than normal

In Novembe, WSI oecasts:

Notheast – Warmer than normal

Southeast – Colder than normal, except FL

Noth Cental – Colder than normalSouth Cental – Warmer than normal

Nothwest – Warmer than normal

Southwest – Warmer than normal

In Decembe, WSI oecasts:

Notheast – Warmer than normal

Southeast – Warmer than normal

Noth Cental – Colder than normal

South Cental – Warmer than normal

Nothwest – Warmer than normal

Southwest – Warmer than normal

wsi ealy winte view

This is an excellent Website. It looks cool, it eatures all sorts o great news and commentary and readers can post their thoughtson key issues o the day. Thousands o olks hit the site regularly.

Advertising opportunities abound . Ask us or details.

www.enegymeto.com

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indices, benchmaks,access and ainess

Lately, market indices have been in the

news. Again. And, not in a good way. We

think serious government intervention may

be warranted. Yes, we just said that out

loud. A week ago we learned that the EU

was readying a new set o regulations or

the uture regulation o how certain bench-

marks or other price indices are ormed

and reported. We chatted up a ew olks at

FERC and the CFTC this week on the sub-

ject and ound that while everybody was

aware o what their brother regulators were

up to across the pond, it wasn’t really para-

mount among the suite o simmering is-

sues. “Oh it’s a ront-burner issue,” CFTC

commissioner Bart Chilton told us, “but,

there are a lot o ront burner issues...”

In the US, price indices are always under

the regulatory microscope, according to a

couple sources we spoke to, whether or not

those benchmarks are public or private. I

they move markets, regulators, by deni-

tion, should always be interested, right?

And so, we think the story involving a key,

University o Michigan consumer survey,

and pre-release data sales by a news orga-

nization, to be a real bellwether topic. It

should trend in the same direction as the

recently released tome on EU price-bench-

mark regulations that may just touch down

on these shores soon enough. Recall that

a year or so ago, CFTC commissioner Scott

O’Malia had participated in the initial

IOSCO market consultation on oil market

manipulation and benchmark regulation. It

wouldn’t be a surprise to nd him running

point on this topic as well.

On this University o Michigan/

Thomson-Reuters story, we think New

York Attorney General Eric Schneider-

man is spot on. Lately he›s been making

noise about access to certain market data,

and more broadly, airness in access to mar-

ket data. Everybody read the recent WSJ

story about how Thomson Reuters has

been oering up certain market data – spe-

cically, the results o a key University o

Michigan consumer condence survey – to

paying customers ve minutes beore the

university released the same data to the

public. True story. Reuters actually paid

the university a cool $1 million to get the

data, early, or the purpose o resale. All le-

git. On top o the ve-minute lead time o-

ering, Reuters also oered the same data,

or an even higher price, to HFT rms, two

seconds ahead o the ve-minute ahead

customers. Seriously. At a recent Bloom-

berg conerence in NYC, Schneiderman

described the deal as “ar more insidious

than traditional insider trading.” Insider

Trading 2.0, he said. Rigged markets, he

said. “The power to skew the markets was

exactly the ‘service’ that Thomson Reuters

provided to select customers,” Schneider-

man said. We tend to agree. Reuters, stick-

ing to its guns, had released the ollowing

statement in response to the original WSJ

story: the company strongly believes that

news and inormation companies “can

legally distribute nongovernmental data

and exclusive news through services pro-

vided to ee-paying subscribers.” Oddly,

once Schneiderman began his investiga-

tion, Thomson Reuters and the university

agreed to stop giving out the survey results

early until the probe was completed, ac-

cording to reports. Last time we checked,

the AG didn’t necessarily say anything ille-

gal was going on here; but, the issue o air-

ness was ront and center. Market integrity

and all. Condence in markets. “Not being

in the spirit o market practices,” will be a

term we hear more regularly we believe.

We wondered i Platts or Bloom-

ie or Argus or any o the other big provid-

ers o market and index data to our avorite

sector also oered indices early to some

traders, or a price. We sent notes to several

companies asking the question, “Do you

oer as a premium service to customers,

any indices or market data, ahead o the

usual release time? That is, say, as an exam-

ple, oil or gas (or any other) indices X sec-

onds or minutes early, or a price?” We im-

mediately heard back rom Kathleen Tanzy,

Platts’ Director o Strategic Industry Com-

munications: “Absolutely not,”she told us.

We could almost eel her st pounding her

desk or emphasis. We also had a lengthy

chat with an Argus data sales exec who

largely said the same thing – subscribers

all get their data at the same time, whether

its mid-day or end-o-day. And no excep-

tions. Bloomie never got back to us. Our

personal view is that any such data with

a market-moving capability, like a Platts

“window” or a university-based consumer

condence survey, should be available to

everybody, equally. Pay a million bucks to

get it early? No dice. The AG noted in his

speech recently that he’s alerted olks in

DC about this matter, to look urther to

see i regulation is needed. We’re not sure

ormal regulation is needed, but, certainly

some guidance might be a reasonable path

orward.

As or the European Commission’s

Proposal or a Regulation on Indices, take

note the ollowing details. Much o this stu

could translate to US markets, easily. And,

we reckon it will, within the next year. So, you

might ask, why these regulations at all?

“The manipulation o LIBOR

and EURIBOR has sparked concerns about

the integrity o benchmarks around the

world. I benchmarks do not refect accurate-

ly what they are meant to measure, the price

or payments will not be air. Benchmarks can

ail to measure what they are meant to when

they are manipulated or are not represen-

tative. Condence in their use may also be

undermined when they are not robust and

reliable...,” the EC proposal says.

This is the basis or the new regula-

tions. Sort o. Certainly, it’s the most recent

and high-prole impetus or change in how

benchmarks are managed by non-government

entities. It was however, suspicion o oil and

gas price/price index manipulation, that rst

raised the question about regulation.

“While these LIBOR/EURIBOR)

are the most high prole events, there are

(Continued)

http://topics.wsj.com/person/S/Eric-Schneiderman/7092






investigations underway o potential ma-

nipulation o gas benchmarks by the Finan-

cial Conduct Authority (FCA) and Ogem

(the energy regulator) in the UK, as well as

a Commission investigation over suspected

collusion to distort oil price benchmarks.

Concerns have also been reported in the press

regarding the manipulation o oreign ex-

change benchmarks…”

“The changes proposed by the Com-

mission to its market abuse and criminal

sanctions proposals will ensure that any abuse

is properly sanctioned. But we also need to

prevent uture problems and improve the

way benchmarks are produced and used. In

light o its public consultation and the analy-

sis o its impact assessment, the Commission

concluded that regulation was necessary to

improve the unctioning and governance o

benchmarks in the EU…”

Further, the Commission reckoned

that regulation at EU level is required be-

cause while some benchmarks are national,

the benchmark industry as a whole is inter-

national in both production and use. “For

benchmarks that are widely used or produced

across several Member States, national ac-

tion may lead to ragmentation o the single

market and could acilitate regulatory arbi-

trage, as benchmark production can be easily

moved to other Member States. By contrast,

an EU initiative helps to enhance the single

market by creating a common ramework or

reliable and correctly used benchmarks across

dierent Member States.” True enough.

The objectives o the proposed

regulation are as ollows:

• enhance governance and controls

in benchmark setting;

• limit and manage conicts of

interest at benchmark providers and

contributors;

• improve the quality of input data

and methodologies, including the use

o sucient and accurate data; and

• ensure adequate protection for

investors and consumers through im-

proved transparency and suitability as-

sessments.

What changes does the proposal

make to ensure the provision and use o

robust and reliable benchmarks?

The main changes are:

• benchmark providers will be reg-

ulated and supervised, as will contrib-

utors who are already regulated (e.g.

as nancial institutions);

• conficts o interest will have to

be managed;

• the providers o benchmarks and

contributors to benchmarks will need

to ensure appropriate governance and

controls over the benchmark-setting

process;

• methodologies will need to be

transparent and robust and ensure the

use o sucient, accurate and repre-

sentative underlying data;

• improved transparency o the

benchmark-setting process; and

• suitability o assessments o

benchmarks or retail contracts.

An EU statement noted that the

regulation o benchmarks “minimizes dis-

cretion by requiring the use o robust meth-

odologies and sucient and reliable data. In

particular, transaction data should be used

where possible, although i this is not pos-

sible, other data, such as estimates, may be

used provided that it is always veriable…”

For more inormation, go to

http://ec.europa.eu/internal_market/

consultations/2012/benchmarks_en.htm

Sixty-two percent o the world’s largest

global companies already have to deal with

adverse impacts caused by climate change

or expect to be doing so in the next de-

cade, according to the Center or Climate

and Energy Solutions (CCES).

“Companies are most concerned

about the direct impacts o extreme weath-

er on production, production and supplies,

and indirect impacts on operational costs,

such as higher prices or commodities orinsurance,” according a study, “Weathering

the Storm: Building Business Resilience to

Climate Change.”

Seventy-ve percent o the

world’s 100 largest companies say that cli-

mate change provides new business oppor-

tunities with the development o drought

resistant crops, storm-resistant building

materials and weather-related insurance

products.

“In 2012, 800-plus major weath-

er-related disasters worldwide led to more

than $130 billion in losses, with the most

costly events (Hurricane Sandy and the

Midwest drought) occurring in the United

States,” says the study. “Climate scientists

tell us to expect more requent and intense

heat waves, higher sea levels, and more se-

vere droughts, wildres and downpours.

These extreme weather events can severely

disrupt a company’s operations, acilities,

and logistics and supply chains.”

But America’s largest compa-nies are not sold on climate change. O

the companies asked i impacts o climate

change are already occurring, only 21 per-

cent o American companies agreed, com-

pared to 50 percent o Asian companies

and 47 percent o European companies.

Twenty-seven percent o the American

companies said that the impacts o climate

change are unknown, compared to 0 per-

cent o Asian companies and 5 percent o

European companies. Many o the world’s

largest companies already

have been impacted by adverse weather

events. Hurricanes Gustav and Ike in 2008

cost Dow Chemical Co. $181 million in

damaged Gul Coast production acilities.

Floods in Thailand inundated Honda’s as-

sembly plants in 2011, leading to a loss o

$250 million. The same foods led to a 7

percent decline in revenue or Hewlett-

Packard. Dominion Resources had to close

one o its two units at its Millstone nuclear

plant because the temperature o the waterit was drawing rom Long Island Sound

was too warm.

“It was the rst time in the

plant’s 37-year history that it had to shut

down due to excessively warm seawater,”

says the study. Chevron took a $1.4 billion

loss due to damage caused by hurricanes

Rita and Katrina in 2005.

The study is located at www.c2es.

org/docUploads/business -resilience-report-

07-2013-nal.pd .

climate impacts elt by global companies

http://ec.europa.eu/internal_market/consultations/2012/benchmarks_en.htm


http://www.c2es.org/docUploads/business


http://localhost/var/www/apps/conversion/tmp/scratch_7/-resilience-report-07-2013-final.pdf










eclassiy thisSo, the good news is that i a gas storage

report reclassication happens any time in

the next ew months, you won’t be sur-

prised. EIA will now give you a heads up,

a week ahead o time. No kiddin. Not likelast month’s whopping reclassication that

blindsided the lot o us. This week the EIA

announced a signicant, and we think al-

together positive change to the way reclas-

sications are handled in the weekly gas

storage report. Soon, EIA will separate out

physical and non-physical gas movement in

our avorite report, the “WNGSR” by add-

ing a new column to the report: Implied

Flow will now appear next to Net Change.

Brilliant. We’d like to think that our weekly

editorial harassment o EIA had somethingto do with this latest report change, but

EIA’s Jose Villar assures us that we’d be

kidding ourselves. “This change to the re-

port has been on my mind or a long time,”

Villar tells us. “I think this will be a huge

improvement or our customers.” The new

ormat will go through a lengthy testing

phase, or the benet o those using auto-

mated data retrieval systems, and should be

nalized hopeully by the top o the year.

So, why now? Why the big change to the

report?“I think ater the last report came

out (the August 8 reclassication) there

was a consensus inside our shop that we

need to come up with a way to serve our

customers better. I can say the consensus

ormed very quickly… and the next task

was to determine how to make the best

change in the timeliest ashion. We simply

didn’t want to report another reclassica-tion like the one we had in August, under

the previous paradigm, that is, adding the

reclassication to a note at the bottom o

the report. As you know, that was airly dis-

ruptive.” Understatement o the year.

The beauty o this change is that

it doesn’t have to go through any sort o

lengthy comment process, simply a limited

test phase. O course, on the subject o re-

vision thresholds, as in, the arcane 7 Bc

level we currently enjoy – he says would

still necessitate the standard Federal Reg-ister route. However, he hinted that this

change is also potentially in the cards. Sor-

ry no timeline.

“But, the solution we came up

with or reclassications, the net change/

implied fow, will go a long way in helping

people interpret our numbers,” he says.

So, how’s it all gonna work? Ac-

cording to a statement by EIA, the agency

will now “add an estimate o the “implied

fow” o working natural gas into or out

o storage acilities that will exclude the e-ect o reportable reclassications rom the

“net change” in working natural gas to the

WNGSR summary table. EIA will continue

to provide an explanatory note separating

the eect o reportable reclassications

rom the implied fow included in the “net

change.” Separating the “implied fow”

rom the “net change” explicitly in the ta-

ble will permit automated retrieval systemsto choose the measure most directly rel-

evant to their purpose: either the “implied

fow” i they are attempting to understand

the week’s physical fow o natural gas into

or out o storage acilities, or “net change”

i they want to include the eects o report-

able reclassications.”

As an example, under the new

ormat and or the big misre week ending

August 2, 2013, would have included an

“implied fow” totaling 82 Bc in addition

to a “net change” o 96 Bc “in order todistinguish the 14-Bc reclassication that

was reported or the week. The “implied

fow” excludes only the eects o report-

able reclassications rom the “net change”

in working natural gas levels. The “implied

fow” may contain the eects o unpub-

lished net revisions to working natural gas

levels o less than 7 Bc.”

The testing phase should last

a ew weeks. The nal ormat will be an-

nounced soon.

For the notice o change, go to http://ir.eia.gov/ngs/notice.html . For ques-

tions, contact Jose Villar at 202/586-9613 or

[email protected] .

___________________________________________________________________________________________________________________________________Name Title Organization___________________________________________________________________________________________________________________________________

Address City State Zip Code

Phone E-Mail (very important)

Charge my: Amex Visa MC

Account Number Exp. Date Signature

To order by phone, call 410/923-0688 or ax your order to 410/923-0667. E-mail to [email protected] . Mail your order to: Scudder Publishing Group 1145 Generals Hwy Crownsville, MD 21032. MD residents, please add 6% sales tax. Make all checks payable to the Scudder Publishing Group.

Fax this ode om to 410.923.0667

Yes! Please send me one year o Energy Metro Desk at the SPECIAL rATE o $629.

http://ir.eia.gov/ngs/notice.html





http://ir.eia.gov/ngs/notice.html



bentek’s s/d summay The table and graph below are summaries extracted rom Bentek’s Daily Supply/Demand Balance report which provides a daily

estimate o total US demand, production, imports/exports and storage injections/withdrawals. The table shows month-to-date and

year-to-date comparisons o year-on-year data as o the date located in the top let o the table. The graph indicates the daily supply/demand

trend over the past six months. This data is provided courtesy o Bentek Energy. For more inormation about Bentek’s Daily Supply/Demand

Balance Report, go to www.bentekenergy.com .

Disclaimer. This inormation is urnished on an “as is” basis. BENTEK does not warrant the accuracy or correctness o the inormation contained therein. BENTEK makes no warranty, express or implied, as to the use o any inormation in connection with trading o commodities, equities, utures, options or any other use. BENTEK makes no express or implied warranties and expressly disclaims all warranties o merchantability or tness or a particular purpose. In no event shall BENTEK be liable or any direct, indirect, special,incidental, or consequential damages (including lost prot) arising out o or related to the accuracy or correctness o this report or the inormation contained therein, whether based on warranty, contract, tort or any other legal theory.

amerexenergy.com

Amerex operates deep and liquid markets in electrical power, natural

gas, emissions allowances, renewable energy credits and coal. More

than thirty years of market experience has led Amerex to become one

of the world’s largest over-the-counter energy brokers. Amerex offers

liquidity, timely execution and rich market data to meet the needs of

thousands of traders and risk management professionals.

Natural Gas

Electrical Power

Environmental Commodities

Coal

Market Data

We don’t move energy.

It moves us.

Supply Demand

As of 9/5 S-13 S-12 Chg % Chg 9/1/2013 9/1/2012 Chg % Chg

Gross Production 73.6 70.1 3.5 5.0% 73.4 72.0 1.4 1.9%

NGL/Other Shrink 8.8 8.4 0.4 4.8% 8.8 8.6 0.2 2.3%

Dry Production 64.7 61.7 3.0 4.9% 64.6 63.4 1.2 1.9%

Canadian Imports 5.3 5.5 (0.2) -3.6% 5.1 5.5 (0.4) -7.3%

LNG Sendout 0.4 0.4 0.0 0.0% 0.3 0.5 (0.2) -40.0%

Supply 70.4 67.7 2.7 4.0% 70.0 69.4 0.6 0.9%

Mexican Exports 1.9 1.8 0.1 5.6% 1.8 1.5 0.3 20.0%

U.S. Demand 57.6 61.9 (4.3) -6.9% 68.7 68.2 0.5 0.7%

Power Burn 27.3 32.5 (5.2) -16.0% 22.8 26.5 (3.7) -14.0%

Industrial 17.7 17.7 0.0 0.0% 19.2 18.8 0.4 2.1%

ResComm 10.9 9.9 1.0 10.1% 24.8 21.0 3.8 18.1%

Pipe Loss 1.6 1.8 (0.2) -11.1% 1.9 1.9 0.0 0.0%

Balance (0.9) 0.6 (1.5) -250.0% (0.2) 0.2 (0.4) -200.0%

Demand 59.4 63.7 (4.3) -6.8% 70.5 69.7 0.8 1.1%

BENTEK Daily Supply Demand Balance (Bcf)

MTD Change YTD Change

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Documents

Energy Metro Desk Sept. 27, 2013