Capstone Energy Services


US GAS Futures End Lower On Waning Storm Threat, Ample Supplies

August 24th, 2010

(Dow Jones) – Natural gas futures ended lower Monday, as concerns waned about a tropical storm in the Atlantic and as ample gas supplies and anticipation of milder weather weighed on prices.

Natural gas for September delivery on the New York Mercantile Exchange settled down 5.1 cents, or 1.24%, at $4.066 a million British thermal units, the lowest settlement price since May 25. The front-month contract sank to an intraday low of $4.029/MMBtu during the session.

Natural gas prices are under pressure as forecasters abated some of the fears over Tropical Storm Danielle, which is located about 1,025 miles west of the Cape Verde Islands. Meteorologists with forecasting firm Commodity Weather Group said Monday the storm will likely remain at sea.

“The Tropics are more active in the deep Atlantic, but no Gulf threats are seen,” the forecasters wrote in a note to clients.

Analysts and traders closely watch storm activity in that could go on to threaten energy supplies from the U.S. Gulf of Mexico, an energy-rich region representing about 11% of domestic gas output. The market is moving through the hurricane season’s busiest portion, which runs from late August to early September. And without an immediate threat, some traders were selling off contracts.

The National Weather Service was also monitoring an area of disturbed weather off the coast of Africa. Forecasters with the agency give that cluster of thunderstorms a moderate chance for tropical cyclone formation.

Meanwhile, forecasters are expecting a break in hot summer weather across parts of the Midwest, the Great Plains and the Northeast this week. But hot weather is expected to return next week, which could spur some additional demand for natural gas to generate electricity for cooling.

“This week will be relatively cool. But don’t get to used to it, because the heat is going to come back,” said Jim Rouiller, senior energy meteorologist with the private forecasting firm Planalytics.

However, analysts noted that the market is already looking to the end of summer, when weather-related demand for natural-gas fired power slackens and production continues, adding more gas to already robust U.S. inventories.

“We are down on high production, and traders are looking for big injections” in the fall, Pax Saunders, an analyst with Houston-based Gelber & Associates said.

Natural gas in U.S. storage remains well above historical levels. Inventories for the week ended Aug. 13 stood at 3.012 trillion cubic feet, 7% above the five-year average, despite the hot weather that in recent weeks has led to small inventory builds.

FUTURES                   SETTLEMENT                   NET CHANGE
Nymex Sep                      $4.066                                  -5.1c
Nymex Oct                       $4.084                                 -5.3c
Nymex Nov                      $4.279                                  -6.3c

CASH HUB                    RANGE                   PREVIOUS DAY
Henry Hub                     $4.10-$4.16               $4.14-$4.21
Transco 65                    $4.08-$4.13              $4.14-$4.21
Tex East M3                  $4.31-$4.45              $4.38-$4.45
Transco Z6                    $4.34-$4.50              $4.39-$4.45
SoCal                             $3.58-$3.69              $3.53-$3.60
El Paso Perm                $3.58-$3.76              $3.54-$3.64
El Paso SJ                     $3.40-$3.58              $3.40-$3.48
Waha                             $3.67-$3.83              $3.63-$3.75
Katy                               $4.03-$4.10              $4.08-$4.16


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.


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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