MARKET WATCHWeather boosts natural gas futures price

June 15, 2006
Energy prices generally increased June 14, with natural gas hitting its highest closing in 2 weeks.

Sam Fletcher
Senior Writer

HOUSTON, June 15 -- Energy prices generally increased June 14, with natural gas hitting its highest closing in 2 weeks on predictions of warm weather for the US and expectations for another active hurricane season.

"While North American natural gas prices (and more specifically, spot and prompt futures prices) have been under considerable pressure during the first half of 2006, owing to abnormally mild winter weather and lackluster demand, we believe long-term gas fundamentals remain well supported," said Ronald J. Barone of UBS Securities LLC in New York. "Moreover, we expect the recent gas price weakness to rebalance the market over the coming months. In turn, this should shrink the storage overhang and enable the underlying tightness in the North American gas supply-demand picture to reassert itself as we move through the second half and into 2007."

The Energy Information Administration reported June 15 the injection of 77 bcf of natural gas into US underground storage during the week ended June 9. That was well below the consensus of Wall Street analysts, unchanged from the injection rate of the previous week, but up from an injection of 73 bcf during the same period a year ago.

US gas storage now stands at 2.4 tcf, up by 451 bcf from the same time a year ago and 659 bcf above the 5-year average.

Earlier, EIA reported commercial US inventories of crude fell by 900,000 bbl to 345.7 million bbl during the week ended June 9. Gasoline stocks increased by 2.8 million bbl to 213.1 million bbl during the same period. Distillate fuel inventories rose by 2.1 million bbl to 122.8 million bbl, as "a large increase in ultra-low sulfur [15 ppm] diesel fuel was almost completely compensated by a decline in regular diesel fuel," said EIA officials.

The latest US weekly oil data show strong gasoline demand of 9.407 million b/d, with refineries continuing to produce more gasoline than a year ago, although producing less oil products in total. "Overall, inventories grew by some 3 million bbl more than the seasonal norm, resulting in the uptick of inventory above the 5-year average," said Paul Horsnell with Barclays Capital Inc., London. "Gasoline inventories have continued to play catch-up, helped on by a sustained high level of imports."

Energy prices
The July natural gas contract jumped by 42.7¢ to $6.59/MMbtu June 14 on the New York Mercantile Exchange. The July contract for benchmark US sweet, light crudes escalated by 58¢ to $69.14/bbl. The August contract was up by 33¢ to $69.62/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., increased by 58¢ to $69.14/bbl. Heating oil for July delivery inched up by 0.43¢ to $1.94/gal. However, gasoline for the same month dropped 1.59¢ to $2.04/gal, the lowest level since late May.

In London, the July IPE contract for North Sea Brent crude increased by 6¢ to $66.98/bbl. Gas oil for July delivery dipped by 25¢ to $613.50/tonne.

The Vienna headquarters for the Organization of Petroleum Exporting Countries was closed for a holiday June 15, so no price update was available.

Contact Sam Fletcher at [email protected].