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Weekly Energy Market Update May 13, 2013

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Weekly Energy Market Update video for May 13, 2013.

  • Natural gas prices continued to retreat last week, as weather and storage trends have turned bearish. Long-term prices have fallen much less however than near term prices over the past three weeks. Prices have finally broken through the $4.00 threshold, closing the last five trading sessions between $3.90 and $4.00, and settling at a 5-week low on Friday (May 10), at $3.91.
  • Overall, long-term price curves remain relatively flat through Calendar 2016, although we are seeing a return to contango in the market, as prices for future calendar years begin to separate. The 12-month Strip fell by 11 cents, while Calendar '14 fell by six cents, Calendar '15 fell by two cents, and Calendar '16 remained unchanged.
  • Most of the price downturn comes on the heels of two weeks of favorable storage reports and is quite a departure from the 21-month highs we saw last month. Last week, the EIA reported an injection of 88 Bcf, which was within the range of expectations albeit much larger than historical builds. Current inventory through May 3 is 1,865 Bcf, which is 737 Bcf (28.3%) less than last year and 99 Bcf (5%)below the five-year average.
  • According to Baker Hughes, total U.S. rig counts are at an 18-year low and were down four rigs to 350 last week. Horizontal rig counts are up seven versus last week but are down 51 (4%) from last year.
  • With the market currently trading below $4.00, it may be a good time to buy. Summer weather can be a key risk or an opportunity, and more price downside appears to be contingent upon continued large natural gas storage injections and mild weather.

Posted: May 14, 2013