EIA Discussion for Week Ending 5-15-09

Ben Smith

http://www.firstenercastfinancial.co...

May 19, 2009

Projected EIA working storage for the week ending May 15, 2009:

First Enercast Financial is expecting an injection of 94 Bcf in this Thursday’s EIA storage report bringing total storage to 2,107 Bcf.

Moderate temperatures last week again are supportive of a higher injection into storage. Cool temperatures across the East and Midwest have moved weather futures values much cooler than average for the month. With the lack of early season cooling demand, natural gas demand remains weak. However, our expectation of a 94 Bcf injection into storage is in line with the average of 90 Bcf for this week of the season. If this verifies, we feel that it would be a bullish signal as other fundamental forces are at work to help bring supply and demand back in balance.

Given last week’s weather, we feel that any injection under 97 Bcf would be a sign that supply is finally coming in and non weather related demand is picking up. Already we are starting to see data that is supportive of increased industrial use. Like we anticipated, lower natural gas prices along with the returning flow of credit has created an environment conducive to some industrial use, such as chemical and fertilizer production. A further boost in demand has been seen recently in fuel switching for electricity generation. This runs counterintuitive to the EIA’s forecast of a decline in industrial demand of 7% this year.

Imports in the form of LNG have failed to ramp as many have expected. Over the past several weeks imports have hovered between 1.5 to 1.8 Bcf/day. Forecasts were calling for around 2 Bcf/day by this time. We believe that LNG supply may not come as quickly as expected as Europe works to fill it’s storage and liquefacation facility construction deadlines are not a critical given today’s low natural gas price.

We are looking for continued support to natural gas prices if the injection comes in below 97 Bcf this week.

The First Enercast Outlook Report service is available for more detailed analysis of long range storage projections and seasonal weather driven impact on energy prices. The May Outlook Report will be released today and is available for purchase now. For information on this separate research product contact us at (303)860-7494, info@firstenercastfinancial.com or visit www.firstenercastfinancial.com/outlo...