Prices to Bottom Out in Sept/Oct

NYMEX

After settling at $3.07/MMBtu yesterday, the August gas futures contract is currently trading at $3.04/MMBtu. By comparison, the 12 month strip is trading at $3.40/MMBtu and next year's winter strip (Nov 12 - Mar 13) is trading at $3.48/MMBtu.

NG to Bottom Out in September/October

High levels of coal-to-gas switching, combined with July temperatures nearly 24% higher than average have significantly cut into the storage surplus, and have therefore sent the price of NG rising.

However, according to analysts at Barclays Capital: "Our base outlook for the rest of the injection season suggests that gas prices can stay at a level not far from $3 in August, but then must correct lower in September and October or risk a price depressing storage fill. That is, storage and prices will self-correct."

Therefore, after rising over 50% from Mays settlement, NG prices are expected drop back down below the $3.00/MMBtu range, potentially to $2.50/MMBtu, before the heating season begins.

Federal Government Seeks Dismissal of NY Drilling Lawsuit

In May 2011, New York State initiated a lawsuit against federal agencies to perform a more complete environmental assessment of the potential impact of gas development on the local water supply.

At the center of it all is the Delaware River Basin Commission, who claims they do not have enough money to conduct a more thorough review, nor are they obligated to.

Assistant U.S. Attorney Sandra Levy argued that because the commission is not a federal agency, not only does it not have to comply with U.S. laws regarding environmental review, but Federal Agencies such as the EPA have no control or influence over how the commission regulates hydraulic fracturing.

On these grounds, the Federal Government is seeking to have the case thrown out, which would assist in allowing Hydraulic Fracturing to begin in New York State.

Storage

Working gas in storage was 3,189 Bcf as of Friday, July 20, 2012, according to EIA estimates. This represents a net increase of 26 Bcf from the previous week. Stocks were 487 Bcf higher than last year at this time and 435 Bcf above the 5-year average of 2,754 Bcf.

Weather

After tropical storm Debby became the earliest fourth named storm in recent history in late June, the Atlantic has calmed down, with no named storms in over a month.