AUG 09 MARKET UPDATE

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.