The weakened economy continues to put downward pressure on natural gas prices, and demand (the economy) will be the key determinate of when prices will hit bottom.

Various market fundamentals of interest this week:

• Goldman Sachs forecast power generation demand to increase 0.75 Bcf/day, largely as a result of price-induced switching from coal to natural gas for power generation in the Appalachian and Southeastern US.
• The natural gas rig count has dropped dramatically, down over 40% from a high of 1,606 rigs last year. Historically, a rig count drop of this magnitude has been associated with market bottoms in natural gas according to Sempra Commodities.
• The current rig count in the U.S. is 884. The last time the rig count was below 884 was in May 2003. The last the time rig count was under 1,000 was May 2004 (ECNG Energy).
• The Canadian rig count stands at 220 active rigs, compared to 510 at this time last year, as per Baker Hughes on March 13.
• In February, US employment fell by 651,000 bringing unemployment to 8.1%. December and January’s lob loss figures were also revised downward to 681,000 and 655,000 jobs respectively. March job losses will be released in early April.
• The Baltic Dry Index, which indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, is a key leading indicator of the global economy. This is one of a number of ‘leading’ indicators we are watching to help evaluate when the world economy will begin to turn around. After a steep drop in late 2008, the index has shown some signs of stability.

Please contact your client Services Rep. for any questions on your account.

Ontario Power

Average ON PEAK Price for Mar: 4.5 cents / kWh
ON PEAK Hours over 7.0 cents: 11 % in Mar.
15 % year to date
Highest price in the past week: 7.1 cents / kWh on Mar 10th

The IESO reported that wind generation in Ontario achieved record output on March 11, 2009. Over the 24 hours wind energy totaled 16,585 MWhs, enough electricity to power a city the size of Peterborough for a week. The highest output was 781 MW in one hour that day.

The decrease in Ontario’s industrial output has reduced the demand for power, prompting Ontario Power Generation to reduce the GHG adder on its coal plant output to zero dollars, effective March 17. This adder was originally $7.50 per MWh, and was put in place to decrease the amount of coal-fired generation in Ontario this year. With demand at very low levels, OPG finds it unnecessary to increase the price, as the power is simply not required in the first place.