Transcript Document

Commodities Covered
• US Natural Gas
• US Electricity
• Global Crude Oil
• US Diesel
2
Natural Gas
3
Price History
Hurricanes
Katrina and Rita
Global recession
materializes late in 2008
$15
$13
Record Storage
Withdrawals
Coldest Nov-Dec
on Record
Record Heat &
Hurricane Activity
$/MMBtu
$11
Lowest Level of
Storage Going into
Winter
$9
Production
Curtailments Due
to Gulf
Hurricanes
NG-Fired Power
Booms
Natural Gas
Becomes Part of
$7 Inflation Index
Large YOY
surplus and
Amaranth
collapse
New record
peak storage
level
3 Consecutive
Mild Winters
$5
Hurricane Ivan
Disrupts GOM
$3
Warmest January
on record, storage
at all-time high
Sept. 11th
Attack
Colder-thanexpected winter,
and crude
reaches new
highs
$1
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
4
US Production Pullback
25,000
US Conventional Production
US Unconventional Production
20,000
Bcf
15,000
10,000
5,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
5
Canada Production Decline to Continue
6500
6000
Bcf
5500
5000
4500
4000
1995
1997
1999
2001
2003
2005
2007
2009
6
Global LNG Supply to Increase in 2009
50
45
40
35
Bcf/d
30
25
20
15
10
5
0
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
7
Weather-Driven Heating Demand
9,000
4,900
Annual US Heating Degree Days (Left)
8,500
Annual Residential & Commercial Demand (Right)
4,700
8,000
4,500
4,300
7,000
4,100
Bcf
HDDs
7,500
6,500
3,900
6,000
3,700
5,500
3,500
5,000
1995
1997
1999
2001
2003
2005
2007
2009
8
Gas-Fired Generation Capacity Growth
1,100,000
Other
1,080,000
Petroleum
Coal
1,060,000
NG
Existing
MW
1,040,000
1,020,000
1,000,000
980,000
960,000
940,000
920,000
2008
2009
2010
2011
2012
2009 EIA Estimates
9
Recession Hinders Industrial Activity
10
160
120
80
40
0
0
-40
-5
Bcf
Index & GDP (%)
5
-80
-120
-10
YOY US Dollar Index
US GDP Growth
YOY Industrial Demand (Right)
-15
2004Q1 2004Q4 2005Q3 2006Q2 2007Q1 2007Q4 2008Q3 2009 Q2
-160
-200
-240
10
US Natural Gas Price Forecast
$14
$12
$10
$8
$6
$4
$2
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
11
Electric Power
12
Power Generation by Source
19%
Texas
16%
19%
California
6%
11%
5%
70%
13%
11%
41%
14%
30%
5%
18%
43%
18%
5%
New York
13%
10%
PJM
33%
13
Northern California 2009 Forwards
$120.00
$110.00
$/MWh
$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
Jun-06
Oct-06
Feb-07
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
14
ERCOT 2009 On-Peak Wholesale Forwards
$120.00
$110.00
$100.00
$/MWh
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
Jun-06
Oct-06
Feb-07
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
15
New York Zone J 2009 On-Peak Forwards
$180.00
$160.00
$/MWh
$140.00
$120.00
$100.00
$80.00
$60.00
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
16
PJM (PA-NJ-MD) 2009 On-Peak Forwards
$120.00
$110.00
$/MWh
$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09
17
Crude Oil
18
Price History
$150
Record weakness in US
dollar; strong emergning
market demand
Indicates New Market High
$130
OPEC cuts lead to
sharp inventory
decline
$110
Hurricanes
Katrina and
Rita
$/bbl
$90
$70
Unrest in Lebanon,
Iran, and Nigeria
Hurricane Ivan
OPEC output cuts and
resurgent demand
triple prices
Iraq invades
Kuwait
$50
Dissolution of
the USSR
OPEC increases output as
demand eases
Strikes in Venezuela;
buildup to Iraq War
US bombs Iraq
Exxon Valdez Spill
$30
Supply
disruptions
in Iran,
Nigeria
Global
Recession
US invades Iraq; oil
fields unharmed
Fears of recession weigh on prices
following September 11
Persian Gulf War ends
$10
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
19
OECD Demand Plummets
2.0
1.5
1.0
0.5
mbpd
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
-3.0
-3.5
1996
OECD Pacific
OECD Europe
OECD North America
1998
2000
2002
2004
2006
2008
20
China Signals Non-OECD Weakness
12%
90%
Non-Opec Demand Growth
China Real Import Growth (right)
China Real Export Growth (right)
8%
60%
4%
30%
0%
0%
-4%
1Q1996
-30%
1Q1998
1Q2000
1Q2002
1Q2004
1Q2006
1Q2008
21
Non-Opec Supply Growth Struggles
4.0
3.0
Global Demand Growth
Non-Opec Supply Growth
mbpd
2.0
1.0
0.0
-1.0
-2.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
22
Opec Cuts Aggressively
12
30
Spare Capacity (right)
Quota
Production
10
28
26
6
24
4
22
2
20
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
0
mbpd
mbpd
8
*Bloomberg Data
23
Strong US Crude Oil Stock Position
370
350
mb
330
310
290
270
Five-Year Average
250
Jan
Feb Mar
Apr
May
Jun
2009
Jul
Aug
Sep
2008
Oct
Nov Dec
24
Crude Oil Price Forecast
$140
$120
Prompt Month West Texas Intermediate
$100
$80
$60
$40
$20
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
25
Diesel Fuel
26
Where to Watch
700
600
Change in Distillate Demand, 2004-2008
500
400
kbpd
300
200
100
0
-100
-200
-300
Japan
US
Russia
Latin
America
India
Europe
China
Opec
27
Decoupling Falls Apart - China
12%
8%
Annual Change
4%
0%
-4%
-8%
Index of Lagging Indicators
Index of Coincident Indicators
Index of Leading Indicators
-12%
-16%
1992
1994
1996
1998
2000
2002
2004
2006
2008
28
Chinese Diesel Demand Falters
3.2
3.0
2.8
2.6
mbpd
2.4
2.2
2.0
1.8
1.6
1.4
1.2
Jan
5-Year Average
Feb
Mar
Apr
May
Jun
2007
Jul
Aug
Sep
2008
Oct
Nov
Dec
29
1990 = 100
Has China Stabilized?
7000
6000
Shanghai Stock Exchange Composite Index
5000
4000
3000
2000
1000
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
30
Still Awaiting the US Turnaround…
31
Demand Growth Depends on Econ Recovery
60%
10%
8%
40%
6%
4%
20%
2%
0%
0%
-2%
-20%
-4%
-6%
-40%
US Consumer Confidence
-8%
Transport Fuel Demand (right)
-60%
1980
-10%
1983
1986
1989
1992
1995
1998
2001
2004
2007
32
Retail Diesel Price Forecast
$5.0
$4.5
EIA Retail Diesel National Average
$4.0
$3.5
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
33
Overview
• The deteriorating economy has reduced the demand outlook for natural
gas, particularly by the industrial sector. Weak pricing and tighter credit
conditions have reduced the supply outlook. As a result, the
supply/demand balance is expected to be tight, providing support to prices
from currently weak levels.
• Look for most deregulated power markets to largely follow the natural gas
market, although some regional nuances could drive prices for short
periods of time near settlement.
• The global recession is weighing heavily on global oil demand and prices.
Low prices create a challenging environment for supply development,
however, which sets the stage for a strong price recovery when demand
returns.
• Global diesel prices will continue to perform poorly as long as the global
economy is in a tailspin. Once economic growth stabilizes, we expect the
market to begin to recover in fairly short order.
34
Tim Statts
Vice President, Risk Management
[email protected]
www.summitenergy.com
502.753.3148
35