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Weekly Energy Market Update August 19, 2013

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Weekly Energy Market Update video for August 19, 2013. 

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

Natural gas futures moved up due to a lower-than-expected storage injection and some modestly bullish weather forecasts. The Prompt Month moved up 13 cents to $3.36 and the 12-month Strip closed at $3.69, up 14 cents for the week. Calendars '14, '15 and '16 rose 9-14 cents last week to $3.83, $4.08 and $4.22 respectively.

Last week the EIA reported an injection of 65 Bcf, which was below expectations (70 Bcf) but above last year (20 Bcf) and below the 5-year average (42 Bcf). This is the 20th consecutive injection that has exceeded the same week last year. Current inventory through August 9 is 3,006 Bcf, which is 7.7% below last year and now 1.5% above the 5-year average.

Late August weather is expected to heat up versus normal, although it could be “too little too late" in terms of price impact. The markets responded to this forecast with a minor rally and consecutive "up days" for the first time in a month.

Domestic gas production output, which is up versus a year ago, remains strong at 65.1 Bcf/day. Completion of new pipeline infrastructure is keeping Marcellus Shale production strong, despite low natural gas prices. Gas demand for power generation is at 26.2 Bcf/day, versus 34.0 Bcf/day at this time last year. The loss of more than 50 Bcf/week of demand is enough to cause bearish storage injections.

Last week’s rally in response to modest bullish factors may be a sign that the market is looking for a bottom or is being very cautious of going lower. While more downside is possible, we do not expect a repeat of 2012 lows, and therefore, consider the value in today's prices for all terms, as prices are low based on historical data.

Posted: August 19, 2013