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Futures End Slightly Higher On Storm Concerns

August 18th, 2010

HOUSTON (Dow Jones) – Natural gas futures ended slightly higher Tuesday as a tropical disturbance looming in the Atlantic Basin raised the specter of hurricanes.

Natural gas for September delivery on the New York Mercantile Exchange settled 3.9 cents, or 0.92%, higher, at $4.267 a million British thermal units. The front-month contract fell to a low of $4.186 in earlier, choppy trading.

Prices received a boost Tuesday from a cluster of thunderstorms moving over the Caribbean Sea. While the National Weather Service said the storms have a low chance for tropical cyclone formation, the storms appeared threatening enough to lift prices. In addition, MDA EarthSat Weather, a private forecasting firm, said that the weather models are suggesting another storm system could develop before the end of the week south of the Cape Verde Islands.

“This is a nod to tropical storm concerns,” said Stephen Schork, president of the energy advisory firm The Schork Group.

Analysts and traders closely monitor storm activity that could go on to threaten gas supplies in the U.S. Gulf of Mexico, an energy-rich region representing about 11% of domestic gas output.

However, natural gas inventories, which can be called upon in case of a supply disruption, are robust. Natural gas in U.S. storage for the week ended Aug. 6 stood at 2.985 trillion cubic feet, 7.9% above the five-year average. Natural gas inventories have swelled this year as producers continued to exploit prolific onshore natural gas fields known as shales.

The natural gas rig count increased last week to 992 rigs, up nine from the previous week. The gas rig count has increased by 44% from the same week a year ago, according to oilfield services provider Baker Hughes Inc. (BHI).

Despite higher levels of drilling activity, hot summer weather has helped slow the growth in inventories by increasing the demand for natural gas-fired power to cool homes and businesses.

“The hot weather so far this year has helped reduce the surplus against the five-year average of natural gas in underground storage, but it has not eliminated it,” analysts with the energy advisory firm Cameron Hanover wrote in a note to clients on Tuesday.

Meanwhile, weather forecasts were mixed. Forecasters with the National Weather Service are predicting above-normal temperatures across the Southeast, the Northeast, the Mid-Atlantic and parts of the Midwest from Aug. 22 to Aug. 26, while meteorologists with the private forecasting firm Commodity Weather Group sees cooler weather along the East Coast and in the Northeast, where temperatures over that same time period will be at near-normal levels.

FUTURES                   SETTLEMENT                   NET CHANGE
Nymex Sep                       $4.267                                +3.9c
Nymex Oct                       $4.283                                 +3.4c
Nymex Nov                       $4.473                                +1.7c

CASH HUB                   RANGE                   PREVIOUS DAY
Henry Hub                   $4.27-$4.36              $4.30-$4.40
Transco 65                   $4.27-$4.31              $4.28-$4.43
Tex East M3                 $4.57-$4.65              $4.69-$4.78
Transco Z6                   $4.63-$4.71               $4.78-$4.83
SoCal                            $3.60-$3.73              $3.78-$3.90
El Paso Perm               $3.74-$3.81               $3.85-$3.94
El Paso SJ                    $3.45-$3.68               $3.65-$3.72
Waha                             $3.85-$3.95                $3.93-$4.06
Katy                               $4.21-$4.28                $4.26-$4.40

_____

By Jason Womack

Glossary Terms

Glossary Terms

Nominated Volume

The physical quantity of gas requested, typically in MMBtu/day, for a specific contract or for all contracts at a specific point.

Marketing Affiliate

A marketing company that has corporate ties to an interstate pipeline, an intrastate pipeline, or a local distribution company.

Energy Only Providers

Power marketers or other electricity vendors who provide and bill for only the energy component of the electricity consumed by the end-use customer.

Therm

A unit of heating value equivalent to 100,000 British thermal units (Btu).

Real Power

The component of electric power that performs work, typically measured in kilowatts (kW) or megawatts (MW)--sometimes referred to as Active Power.

Injection (Storage)

The process of delivering natural gas into a storage field for future delivery and use.

Price Ceiling

Statutory maximum lawful prices for various categories of natural gas, including gas destined for both the intrastate and interstate markets.

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