Market commentary
August 2008
Natural gas prices decreased sharply in July. The Sumas daily index fell from a high of $10.99 CDN/GJ on July 1 to a low of $7.43 CDN/GJ on July 31, with an average of $9.01 CDN/GJ for the month of July. The average Sumas daily index for the first days of August was $7.34 CDN/GJ. One of the factors affecting the natural gas prices is the plunging crude oil prices. Crude oil prices fell from a record of $147.27 a barrel at July 11, 2008, and currently trade around $121 a barrel.
For the week ending July 25, 2008, the Energy Information Administration (EIA) reported a storage injection of 65 BCF, increasing storage levels in the United States to 2,461 BCF, which is 357 BCF or 13% lower than last year’s level and 12 BCF below the five year average of 2,473 BCF. Although storage levels are still slightly below average for this time of year, the gap has narrowed over the past weeks. This is despite the lower than expected level of liquefied natural gas (LNG) imports into North America because higher-priced Europe currently forms a more attractive market for flexible LNG suppliers. Enerdata reported that natural gas storage in Canada increased to 423 BCF on July 25, 69 BCF lower than last year’s level of 492 BCF.
A third factor supporting the fall of natural gas prices are the favorable weather forecasts. Despite the expectation of a warmer than normal summer in main consumption areas, the National Oceanic and Atmospheric Administration (NOAA) forecasts normal temperatures in August for most of North-America.
The NOAA predicts an above average 2008 Atlantic Hurricane Season with 12 to 16 storms, 6 to 9 hurricanes, and 2 to 5 major hurricanes. So far five storms have formed, with tropical storms Bertha and Dolly turning into hurricanes. Tropical Storm Edouard formed on August 3 and made landfall in Southeast Texas near Port Arthur on the morning of August 5. Edouard caused some natural gas and oil production in the Gulf of Mexico to be curtailed.
The graph below shows current and historical natural gas storage levels in the United States.
Please Note: All information contained herein is for informational purposes only and all price indications are as of the close of the previous business day and do not constitute a bid or offer to do business at these prices. This report contains information Terasen Gas obtained from outside sources that are believed to be reliable; however, Terasen Gas has not independently verified and makes no representation or warranty, express or implied, in respect thereof, and takes no responsibility for any errors and omissions which may be contained herein and accepts no liability whatsoever for any loss arising from any use of or reliance on the information, opinions, estimates, projections and any other materials contained herein. Users are advised to independently verify the information contained herein before making any business decision in reliance thereon. By the user continuing to use this website and the information contained herein, the user is deemed to have irrevocably waived all claims against Terasen Gas in respect of any errors and omissions contained therein.
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