Bull/Bear Market Summary  

Natural gas market summary

Supply - Demand - Weather - Storage - Economy - Summary - All factors

Factor - Gas Supply

Outlook

Effect on price

 
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Commentary

Hurricanes have been a non-event in affecting gas production. Rig counts have been down the past few weeks after briefly exceeding the 1,000 mark. Vertical rigs have accounted for the downward movement. Shale gas production is expected to increase by 4 Bcf/d in 2010. Some analysts are predicting a production increase of 5.7 percent for 4Q10 vs. 4Q09.

 

Factor - Consumer Demand

 

Outlook

Effect on price

 
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Commentary

During the autumn shoulder season, electricity demand is down, which has been offset by gas-related residential and commercial demand. While one key industrial indicator (ISM PMI) indicates slight economic growth, it appears inventory restocking is nearing completion and will not be a demand driver any more. That leaves weather as the main source of demand.

 

Factor - Weather

 

Outlook

Effect on price

 
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Commentary

In October, a band of warmer than normal temperatures is expected to stretch across most of the country. The exceptions are the West Coast and Southeast, which are forecasted to have cooler than normal temperatures. This pattern is expected to last through November. Early winter forecasts call for the November – January period to be in line with both last year and the 30-year average. The remainder of the winter currently looks as if it will be milder than normal.

 

Factor - Storage

 

Outlook

Effect on price

 
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Commentary

As of Oct. 1, 2010, working gas in storage was 3,499 Bcf (according to Energy Information Administration estimates.) Stocks were 149 Bcf less than last year at this time and 220 Bcf above the five-year average of 3,279 Bcf. Current projections for the end of the injection season are at 3.65 to 3.7 Tcf. Last year's record end-of-October level was at 3.807 Tcf.

 

Factor - Economy

 

Outlook

Effect on price

 
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Commentary

On the bearish side, consumer sentiment is down. 2Q10 GDP was revised down to 1.7 percent on an annualized basis, and the unemployment rate is at approximately 9.6 percent. On the bullish side, retail sales are up, the Dow is over 10,000, and the GDP projection for 2011 is 2.3 percent.

 

Factor - Summary

 

Outlook

Effect on price

 
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Commentary

Supply still looks as if it will be strong, while demand is idling at best. Weather forecasts indicate little demand increase in the short term. Storage probably will not reach record levels as some analysts had thought earlier in the year, but it is still at healthy levels. Too many contradictory indicators about the economy make it difficult to assert a definitive opinion.

 

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