karen's blog

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.

STORAGE REPORT
This week’s EIA storage report for the week ending July 3, 2009:
This week’s injection of: 75Bcf
Leaving this week’s balance at: 2796 Bcf
This week’s balance last year: 2721 Bcf
This week’s balance, 5-yr average: 2344 Bcf

Natural gas storage is about 19.3 percent above the 5-year average.

THOUGHTS ON THE MARKET

The July 4th price decline remains the most reliable price action in natural gas. The average decline from the June high to the July 4th low has been 19.15% for the 20 year period and 20.22% over the last 5 years. So far, the decline has been 19%, assuming that the July 2nd low marked the end of this pricing event.

Storage continues to refill rapidly. The total US rig count stands at 688 active rigs. While the calendar 2010 strip price looks like attractive insurance at $6/dth, 2011 and 2012 are priced above the mid-point, $6.79 & $7.08, of the trading range that prevailed from 2003 until the economic meltdown began in 2008.

Please mark your calendars to attend the 2nd Annual Rocky Mountain Consumer Energy Conference on Oct 23rd at Invesco Field at Mile High. The information presented at this conference will help you budget your energy costs. Additional information about the conference and registration will follow soon.

STORAGE REPORT
This week’s EIA storage report for the week ending June 5, 2009:
This week’s injection of: 106Bcf
Leaving this week’s balance at: 2443 Bcf
This week’s balance last year: 1875 Bcf
This week’s balance, 5-yr average: 2005 Bcf

Natural gas storage is about 22 percent above the 5-year average. Storage inventories have increased the past four weeks with triple-digit injections. At the current pace inventories could top out above 4 Tcf by the end of October – a level some analysts think may be too great for the system to handle.

THOUGHTS ON THE MARKET

Despite recent increases in natural gas prices recently, the Henry Hub remains well below last year’s level at this time. Absent hurricane activity and demand below normal this summer would be bearish for natural gas prices in light of market expectations that natural gas inventories are already expected to be very full at the end of the injection season.

Crude oil closed over $70/barrel this week while natural gas was unchanged prior to today. Expect to see volatile gas prices all summer with a significant low by fall. If Goldman Sachs is successful at luring investors back into the gas market, the question is how much premium can come out of the long term strips by fall.

The EIA has increased their 2009 and 2010 energy price projections from last month, but these projections are still well below 2007 and 2008 levels, except for electricity, in which the EIA continues increased forward prices.

CSU forecast team now expects a below-average hurricane season, with 11 names storms, five of which will strengthen into hurricanes, with 2 being major storms of Cat 3 or larger.

STORAGE REPORT
This week’s EIA storage report for the week ending April 17, 2009:
This week’s injection of: 46 Bcf
Leaving this week’s balance at: 1741 Bcf
This week’s balance last year: 1282 Bcf
This week’s balance, 5-yr average: 1419 Bcf

Natural gas storage is about 23 percent above the 5-year average and 36 percent higher than a year ago.

STORAGE REPORT
This week’s EIA storage report for the week ending March 13, 2009:
This week’s withdrawal of: 30 Bcf
Leaving this week’s balance at: 1651 Bcf
This week’s balance last year: 1325 Bcf
This week’s balance, 5-yr average: 1423 Bcf

THOUGHTS ON THE MARKET

As the summer storage injection season approaches, the gas market is searching for a bottom, with a rebalancing necessary to keep excess supply from exceeding usage storage capacity before next winter. The April NYMEX gas futures contract fell to a 6 ½ year prompt-month low this past week on the realization that the weather isn’t going anywhere bullish.

Since the NYMEX began trading gas, we’ve had 5 shocking price spikes; 1996, 2000, 2002, 2005, and 2008. Each time, gas prices bottomed out 8 to 10 months after the spike. We are currently in the 8th month since the July 08 high. If you draw a trend line of the low prices for gas, connecting all lows since 1992, that trend line would be intersected today at approx $2.40. Although it has been touched in the past, prices have never dipped below it. History is split on whether the low price for the year occurs in the 1st or 3rd quarter. It would seem like it would be 1st quarter this year with the stimulus package dollars in our economy by 3rd quarter.

STORAGE REPORT
This week’s EIA storage report for the week ending January 30, 2009:
This week’s withdrawal of: 195 Bcf
Leaving this week’s balance at: 2179 Bcf
This week’s balance last year: 2374 Bcf
This week’s balance, 5-yr average: 2162 Bcf

Natural gas storage is about 0.8 percent above the 5-year average and 2.8 percent about last year’s level.

THOUGHTS ON THE MARKET

The gas market is well supplied heading into the last two months of the winter heating season, though a tightening of the supply/demand balance could emerge later on. The gas market is currently characterized by steady production, high natural gas storage inventories, and low prices for competing oil products and reduced industrial demand for natural gas.

March gas dipped to a level approximately equal to the low price of the year for 2003, 2004 and 2006, while the one-year strip price fell to the lowest level since 2004.

Many of you are aware that Xcel Energy has changed their rates effective Jan 1, 2009. If you have any questions, please give Xcel Energy or myself a call.

STORAGE REPORT
This week’s EIA storage report for the week ending December 5, 2008:
This week’s withdrawal of: 67 Bcf
Leaving this week’s balance at: 3291 Bcf
This week’s balance last year: 3336 Bcf
This week’s balance, 5-yr average: 3181 Bcf

Natural gas storage is about 1.3 percent above the 5-year average.

THOUGHTS ON THE MARKET

Since the current gas market is “well supplied from an historical storage perspective heading into the peak heating months, barring an abnormally cold winter, natural gas prices could continue to see headwinds until at least March of next year. However, anticipating a more bullish rebalancing in the gas market during the latter half of next year as curtailed production begins to boost prices.

The relatively low current futures are the result of several factors. The slowing economy has resulted in a decrease of industrial natural gas consumption, and consumption in this sector likely will remain lower in the upcoming months.

Please join me on Oct 24th at Invesco Field at Mile High at 9:00 a.m. to attend the Rocky Mountain Consumer Energy Conference. The information presented at this conference will help you budget for rising energy costs. Click http://www.rmcec.org to receive additional information about the conference and register to attend.

The Inside FERC posted the October 2008 CIG Index at $3.41.

STORAGE REPORT
This week’s EIA storage report for the week ending September 26, 2008:
This week’s injection of: 87 Bcf
Leaving this week’s balance at: 3110 Bcf
This week’s balance last year: 3247 Bcf
This week’s balance, 5-yr average: 3060 Bcf

Should the weekly injections over the next five weeks average 87 Bcf, storage inventories would tie the record-high level reached last year.

THOUGHTS ON THE MARKET

October’s expiration marked the 8th time in 20 months that the NYMEX futures gas has expired in the mid $7 area showing us that when the gas market is lacked of physical events or speculative intervention that skew the market, this is a price point that appears to be fair to both producers and consumers. The lowest price for gas in 3rd quarter was $7.02 on Sept 3rd.

The additional bearish sentiment comes from the early winter forecasts. As I mentioned, WSI expects warmer weather through November with the return of a mile La Nina’ during December which should mean a normal or colder than normal December and January. The Farmer’s Almanac concurs. In recent weeks, gas demand has declined because of hurricane damage to supply infrastructure in the Gulf of Mexico moderate temps, sliding oil prices and economic uncertainty in the wake of the financial sector meltdown.

The sobering news keeps coming for households using natural gas to heat their homes and obviously we all use natural gas in our businesses as well. Nationwide, we are hearing household gas prices are expected to average $14.82/Mcf during the 2008-09 heating season. The projected increases primarily reflect higher prices, although colder weather than last winter will also contribute to higher fuel use in many areas.