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US Gas Future Settle 2.9% Higher at $3.812 per MMbtu

August 31st, 2010

(Dow Jones ) – Natural-gas futures jumped Monday as ongoing risks from hurricane season and a government report showing productions declines in June boosted prices.

Gas for October delivery rose 10.7 cents, or 2.9%, to settle at $3.812/MMBtu on the New York Mercantile Exchange. The gains Monday ended an eight-day selloff in gas futures, which reached 11 month lows last week.

“I think we were too cheap–plain and simple,” Tim Evans, an analyst with Citi Futures Perspective, said Monday.

Robust onshore production from shale formations around the U.S. has been driving futures lower due to concerns of oversupply. But Evans pointed to data released Monday by the U.S. Energy Information Administration that shows U.S. gas production in June in the lower 48 states posted the first month-over-month decline since December 2009, falling 1.2% to 0.81 billion cubic feet a day. At the same time, below-average injections of gas into U.S. storage continue week after week.

Hurricane activity remains a factor as well. No storm is currently headed for the U.S. Gulf of Mexico, but the risk remains as hurricane season continues. The Gulf is home to about 11% of domestic gas output, and prices can rise
sharply if storms affect production.

The National Hurricane Center is tracking two named storms, Danielle and Earl. Both are projected to miss the Gulf of Mexico .

The center is following a low pressure system about 900 miles east of the Lesser Antilles as well. Recent data show the system is already producing tropical storm force winds with the center forecasting a 90% chance the system will form into a tropical cyclone in the next two days.

“I fully expect a storm system on Earl’s heels over central portions of the Atlantic basin to become hurricane Fiona over the next few days and (it) will go on to pose a very distinct threat to Florida and the Gulf,” Jim Rouiller, senior energy meteorologist with the private forecasting firm Planalytics, wrote in a note to clients Monday.

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By Mark Peters

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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Energy Delivery Chains

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Energy & the Environment

Energy & the Environment

How we assist clients in responding to national environmental concerns.

  • Initiate and manage a "Green" energy procurement program
  • Evaluate national legislative and regulatory initiatives
  • Research state and local energy efficiency programs and incentives
  • Track energy use and related emissions estimate