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Weekly Energy Market Update June 17, 2013

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Weekly Energy Market Update video for June 17, 2013.

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

  • We experienced the third week in a row of downward price movement — although the downward momentum is slowing, as market direction was choppy. The July NYMEX settled at $3.73 — down 9 cents — after hitting $3.72 on Tuesday (a low since March 13), the 12-Month Strip settled at $3.90 — down 8 cents – after hitting $3.89 on Tuesday (a low since March 12). Calendar 2014 settled at $4.02 — a low since February 22, 2013 and Calendar 2015 settled at $4.15 — a low since September 10, 2012.
  • The EIA reported a storage injection of 95 Bcf, which was near expectations but was well above last year and the 5-year average. Current inventory through June 7 is 2,347 Bcf, which is 587 Bcf (20%) less than last year, and 58 Bcf (2.4%) below the 5-year average. Due to moderate weather, expect continued larger-than-normal injections for the next two weeks, which should further reduce the storage deficit. Assuming the weather remains normal, projected end-of-October storage should be approximately 3,825 Bcf, compared to 3,929 last year.
  • So far the summer is off to a quiet start, as forecasts for the remainder of June are moderate. Coal prices are also down over the last two weeks, which provides a bit more room.
  • Overall weather and storage have been bearish and that would be the key to more downside. However, lower prices should stimulate increased demand (coal-to-gas switching) and suppress supply (shale cutbacks), thereby providing price support — especially if prices get anywhere near $3.50. We still do not expect a repeat of 2012, regardless of weather. Hot weather is a key upside risk but must be sustained for more than a few days to push the NYMEX much higher.

Posted: June 18, 2013