JUNE 09 MARKET UPDATE

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.