Capstone Energy Services


April Gas Expires At Fresh 10-Year Low Amid Supply Glut

March 29th, 2012

NEW YORK (Dow Jones) – Natural-gas futures were weaker for a third day Wednesday as the April contract expired at a fresh 10-year low amid a growing supply glut.

The incoming front-month May contract, down 9.1 cents over the past three days, is expected to continue to feel pressure from rising inventories caused by high production and weak demand.

Analysts and traders expect data scheduled for release Thursday to show a build in gas inventories of 46 billion cubic feet, which would sharply top the year-earlier level and the five-year average for the week.

If the survey is correct, the data from U.S. Energy Information Administration would put inventories at 2.426 trillion cubic feet, a record high for the week and up 50% from a year ago and 47% above the five-year average.

The storage estimate comes in above last year’s seven-bcf rise in storage for the same week and is above the seven-bcf five-year average draw for the week. EIA data show a post-winter stockbuild of the size that is expected didn’t occur last year until the end of April.

Natural gas for April delivery on the New York Mercantile Exchange settled down 1.7 cents, at $2.191 per million British thermal units. May settled 1.2c lower, at $2.282/mmBtu.

Kyle Cooper, analyst at IAF Advisors, said lingering “ungodly mild” temperatures sapped nationwide demand for gas for home heating. If not for a sharp rise in natural gas use by utilities, who switched from costlier coal, inventory might be rising by as much as 70 to 80 bcf.

EIA electricity data show power generation fell by 6.4% in January from a year earlier, as the number of heating degree days, a measure of weather’s impact on demand, fell by 21.4% from a year earlier. With natural gas prices down 40.3% year-on-year in the month, consumption by utilities jumped 19.9%, while coal consumption fell 21.7%.

FUTURES                          SETTLEMENT                          NET CHANGE
Nymex April                          $2.191                                         -1.7c
Nymex May                           $2.282                                         -1.2c
Nymex June                          $2.401                                         -1.3c

CASH HUB                             RANGE                           PREVIOUS DAY
Henry Hub                      $1.9975-$2.075                    $2.05-$2.1225
Transco 65                      $2.01-$2.07                          $2.05-$2.10
Tex East M3                    $2.1825-$2.31                      $2.205-$2.27
Transco Z6                      $2.17-$2.30                           $2.225-$2.29
SoCal                              $2.29-$2.34                           $2.33-$2.40
El Paso Perm                   $1.87-$1.9575                      $1.92-$1.96
El Paso SJ                       $1.85-$1.90                            $1.87-$1.93
Waha                                $1.91-$1.96                             $1.95-$1.97
Katy                                  $1.93-$2.00                           $1.99-$2.045

By David Bird

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