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Weekly Energy Market Update May 5, 2014

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Below is the Direct Energy Business Weekly Energy Market Update video for May 5, 2014. We embedded this video right into the blog post, so you don’t have to leave this page to view it. The written summary is still below too.

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

Natural gas futures for the next 12 months barely moved this week, down just 2 cents, primarily due to a bearish storage report last Thursday, as well as modest weather and demand.

Futures remain above the range (4.35-4.60) seen in March and beginning of April. Broke out above on 4/17, and have been 4.60-4.80 ever since.

The market continues to focus on storage and the huge deficit. It is now expected that there will be a significant storage deficit compared to historical levels going into next winter, but the question remains - how big? There is much more upside than downside risk.

There have been numerous news stories that could impact the long-term curve as the EIA projects ongoing growth in exports to Mexico, and new pipeline announced by Williams to transport shale production to Georgia. LNG exports also seem likely, and unrest in Ukraine increases benefit to export to Europe.

Near Term: The market is focused on storage replenishment, and that concern has provided impetus for recent market strength. So, while storage refill and generator maintenance should provide some support to 2014 prices, at what point are prices too high? That is a key question to ponder over the next month or so when the focus will quickly switch to summer weather.

Long Term: Cal strips continue to move up. News tends to be bullish overall via continued strong demand for cheap shale gas for LNG exports, Mexican exports, pipelines to Southeast US, etc. Long-term stability is not guaranteed. And regional shale regulation is a risk that can alter drilling economics. Also, watch regional and seasonal variations, as summer price volatility may impact forward prices for locations that are most vulnerable to weather, specifically Texas.

Posted: May 05, 2014