JULY 09 MARKET UPDATE

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.