STORAGE REPORT
This week’s EIA storage report for the week ending January 8, 2010:
This week’s withdrawal of: 266 Bcf
Leaving this week’s balance at: 2852 Bcf
This week’s balance last year: 2749 Bcf
This week’s balance, 5-yr average: 2731 Bcf

Natural gas inventories are now 4.4% above the five year average.

THOUGHTS ON THE MARKET

Gas prices remained basically flat this past week in spite of a storage withdrawal of 266 Bcf that was just short of the all-time record of 274 from the week ending Jan 25, 2008. With the return of normal temperature supplies remain plentiful. Analysts predict another large withdrawal in this upcoming week’s report, with prices to keep falling in the near term.

Natural gas consumption is expected to remain at about the same level in 2010 while we should see a small increase in 2011. Crude oil prices fell for the sixth day this is the longest decline in a month.

STORAGE REPORT
This week’s EIA storage report for the week ending November 27, 2009:
This week’s injection of: 2 Bcf
Leaving this week’s balance at: 3837 Bcf
This week’s balance last year: 3367 Bcf
This week’s balance, 5-yr average: 3350 Bcf

This week’s fill marks the fourth consecutive week of injections for the month of November, the first time a net injection occurred for each week in November since 2001.

THOUGHTS ON THE MARKET

Next year is likely to bring a near-repeat of 2009 gas pricing trends as the US balances a moderate decline in production with a continued abundance of storage gas and higher imports of LNG. Several analysts have lowered their gas price expectations for the next few months as few see any real chance of eliminating the gas glut anytime soon. Storage is holding comfortably above 3.8 Tcf.

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STORAGE REPORT
This week’s EIA storage report for the week ending September 25, 2009:
This week’s injection of: 64 Bcf
Leaving this week’s balance at: 3589 Bcf
This week’s balance last year: 3098 Bcf
This week’s balance, 5-yr average: 3108 Bcf

Natural gas storage is 15.5 percent above the 5-year average level. Natural gas storage inventories reached record-high of 3.589 Tcf with five weeks remaining in the traditional refill season. Many analysts now expect storage levels at the end of October to top 3.9 Tcf.

THOUGHTS ON THE MARKET

Regardless of natural gas storage levels, we are in the 4th quarter and gas prices rally. So far the percentage increase from the single day low price of $2.409 on Sept 4th to the November contract single day high of $4.975 is 107%. History shows that hedging forward gas during the 4th quarter results in overpaying for budget insurance. You may want to wait to make any more forward purchases until prices decline to the 1st quarter low.

For all of its merit, natural gas vehicles don’t appear to be big future gas consumers, as hybrids take off in their stead. It will be gas fired power generation, with a carbon footprint as much as 60% lower than coal plants that will be the future’s big gas consumer.

STORAGE REPORT
This week’s EIA storage report for the week ending September 4, 2009:
This week’s injection of: 69 Bcf
Leaving this week’s balance at: 3392 Bcf
This week’s balance last year: 2897 Bcf
This week’s balance, 5-yr average: 2889 Bcf

Natural gas storage is 17.4 percent above the 5-year average and 17.1 percent above last year’s level.

THOUGHTS ON THE MARKET

The Sept NYMEX closed at the lowest prompt-month expiry in 7 ½ years. Natural gas made an expected rally last week as many consumers and speculators bought in response to the lowest prompt month price. The Dow also closed the week at 9605, the exact level it was at the close of 9/11/2001. Natural gas wasn’t far from its price 8 years ago of $2.40, which was our low last week. After the 9/11 tragedy, prompt gas dropped to $1.76 and the calendar ’02 strip price was $2.90. When we made the low of $2.40 last week, the calendar ’10 strip was $5.25. Historically, multi-year lows are followed in 6 months with a retest of that low and during the retest the forward strip prices are lower than at the time of the initial low. We may be at a multi-year low. Expect gas prices to make a seasonal run up beginning in October. Reasons will range from the seasonal nuclear plant outages to tropical storms, but with storage already at 3.4 Tcf, the Q4 will be muted and early Q1 may be your best bet to buy longer term gas at lower premiums as we end the winter season with record levels of gas still in storage.

Here is another analyst version of what will happen in the upcoming months. EIA expects that the Henry Hub price of natural gas will average $2.25/MMBtu in Oct. Prices are projected to bottom out in Oct and then rise through Feb 2010 averaging $4.59/MMBtu in Feb, and fall from Mar through Aug 2010.

STORAGE REPORT
This week’s EIA storage report for the week ending August 7, 2009:
This week’s injection of: 63 Bcf
Leaving this week’s balance at: 3152 Bcf
This week’s balance last year: 2560 Bcf
This week’s balance, 5-yr average: 2635 Bcf

Natural gas storage is 19.6 percent above the 5-year average and 23.1 percent above last year’s level. Storage at the end of the injection season is projected to be at a record high.

THOUGHTS ON THE MARKET

Natural gas futures fell to a four-week low, adding to a glut of the power-plant and industrial fuel. There’s plenty of storage and little demand to force a rally in gas prices. If US storage reaches capacity, it will push gas into the market that would normally be put away for use later in the year, further depressing prices. Since the beginning of the year, the Sept 09 contract has lost almost 59 percent of its value. The Energy Information Administration (EIA) expects the spot price of natural gas at the Henry Hub to stay below $4.00 until late this year.

Looks like the gas price range will be $3.00 to $3.50 for now. Sluggish industrial consumption because of the recession and reduced demand from electricity generators to power air conditioners has kept gas stockpiles at a surplus.

The August NYMEX gas futures contract dropped to its lowest front-month close since April 27, loosing 11 cents to settle at $3.263/MMBtu on Monday. With the hot temperatures in Texas, in the South and all those areas, but in the big consuming regions it is not. There is a good chance the market will drop below $3 without any significant demand drivers occurring.