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Weekly Energy Market Update April 16, 2013

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Weekly Energy Market Update video for April 16, 2013. 

The following is a summary of last week’s market activity and the market outlook:

  • Natural gas rallied again this week, with the Prompt Month ending the week at its highest level since July 2011. May natural gas futures settled on Friday, April 12 at $4.22. The curve continues to flatten, with Calendars 2014 ($4.26) and 2015 ($4.27) nearly the same and below the 12-month Strip ($4.37).
  • Weather forecasts continue to call for more cold shots and are providing support, along with the storage deficit – which grew again with a final withdrawal last week.
  • Last week the EIA reported a withdrawal of 14 Bcf from storage, which was near expectations but bullish compared to last year and the 5-year average. Current inventory through April 5 is 1,673 Bcf, which is 804 Bcf (32.5%) below last year and 66 Bcf (3.8%) below the 5-year average. We do expect the first injection into storage this week, which is estimated to be 165 Bcf (compared to 216 Bcf last year) based on normal weather.
  • Overall, U.S. natural gas production is up just slightly versus a year ago, but also down slightly versus the all-time domestic production records that were set in November 2012. This is an indication of ongoing strong shale delivery, particularly from the Marcellus play. There have been slowdowns in production in other regions, particularly conventional and dry shale gas plays. According to Baker Hughes, total U.S. rig counts were up two to 377 last week, but are still down 54 over the last four weeks. Horizontal rigs increased by 18 last week but are still down by 29 over the last four weeks.
  • Market strength continues to surprise. The late start for storage injections significantly increases summer demand and thereby pushes up near-term prices limiting the chance of a drop to anywhere near $3.

Posted: April 16, 2013

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