USA’s Production should keep a lid on Nat Gas price Outlook

Commodities changed little during Euro session with both Crude Oil and Gold prices trading near yesterday’s closes.

Asian equities had a mixed day while European bourses and US futures have shown strength after GE’s earnings results and Goldman Sach’s settlement with the SEC.

General Electric announced stronger-than-expected earnings for Q-2 Y 2010. Net profits rose +14.6% to $3.3B during the Q as driven by finance and healthcare divisions.

Goldman Sachs agreed to pay SEC US$550M and change its business practices to settle claims from SEC that it misled investors investments related to sub-prime mortgages. Both stocks rallied in pre-market trading.

Nat Gas price stays at a 1-week high after yesterday’s rally. But, the decline from around US$5.2 in mid-June remains intact and huge production in the USA should continue to keep a lid on the price.

The US Energy Department (EIA) reported that Nat Gas inventory rose +78 bcf to 2840 bcf in the week ended July 9. Stocks were -33 bcf less than the same period last year and +274 bcf, or +10.7%, above the 5 yr average of 2566 bcf. The market is thrilled by the lower-than-expected increase in inventory pushed Nat Gas price to 4.623, the highest level in a week, before settling at 4.586, up +6.5%.

According to EIA, warmer-than-normal temperatures particularly in the East region lifted demand and contributed to the smaller-than-normal net injection into storage. Total demand ended the report week at about 59.7 bcf per day, up +15.3% and +8.3% from the prior week and the same period last year, respectively.

Production remains the critical factor pressuring price. Marketed production averaged close to 61 Bcf per day last week with overall supply levels rising +2.4% from a year ago. Indeed, EIA expects marketed production to grow +3.2% y/y to 61.5 bcf per day in July.

Surge in production and decline in gas price have restrained LNG imports to the US since the beginning of 2010 and we believe LNG imports should stay low to strike a balance between demand and supply.

Supplies of LNG have directed to Europe and Asia. In fact, UK’s ICE futures have outperformed those of Nymex recently as driven by high temperature, gas fired power generation and production interruptions in Norway have supported demand and hence prices. However, risk is skewed to the downside as more LNG supplies are diverted to the region from the USA.—Paul A. Ebeling, Jnr. www.livetradingnews.com

Posted by Shayne Heffernan on Jul 16th, 2010and filed underEquities, Latest News, Markets, News & Events, USA.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site