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Weekly Energy Market Update March 18, 2013

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Weekly Energy Market Update video for March 18, 2013. 

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

  • Impressive upward momentum continued, due to cold weather and another bullish natural gas storage report. April 2013 futures rose by 24 cents to $3.87, the highest close since Nov. 23, 2012 (when it closed at $3.90). In addition to weather, strong industrial demand and a modest production slowdown have contributed to the rally. The forward curve is flattening as long-term prices beyond 2014 are barely moving due to the focus on near-term fundamentals.
  • The EIA reported a draw from storage of 145 bcf for the week ending March 8.  This was much higher than expectations and much bigger than historicals, which clearly contributed to the rally. The current inventory through March 8 is 1,938 Bcf, which leaves a deficit of 440 bcf or 18% versus last year. We remain at a surplus against the 5-year average (currently of 198 Bcf or 11%), with another three withdrawals are expected.
  • Although both total gas and horizontal rig counts have generally stabilized since November, as prices are higher than last spring, we did see a large increase of 24 total gas rigs after we had hit a 14-year low last week.
  • The price rally seems to make sense based on the radical shift in the weather compared to forecasts and compared to a year ago. The $4.00 target is a level we&asp;ve not seen since September 15, 2011. However, lack of long-term price movement indicates that this is a weather-driven rally and producers are still ready to deliver more shale to the market at higher prices.

Posted: March 19, 2013