Summary

June 02, 2008

Natural Gas:

The NYMEX prompt-month contract decreased $0.16 per million British thermal units (MMBtu) to $11.70/MMBtu last week, and the 12-month NYMEX strip price decreased by $0.40/MMBtu to $11.72/MMBtu. The Henry Hub cash price fell $0.14/MMBtu to $11.43/MMBtu.

Storage:

The Energy Information Administration (EIA) storage inventory for the week ending May 23 increased by 87 billion cubic feet (Bcf) to 1.701 trillion cubic feet (Tcf). The size of the injection was slightly larger than expected. The storage level is 8 Bcf below the five-year average and 321 Bcf lower than the same period in 2007.

Weather: 

This week, temperatures over the eastern half of the U.S. should be warmer than normal. The National Weather Service forecasts warmer-than-normal weather east of a line from the Southwest to the Great Lakes in the six- to 10-day and eight- to 14-day time frames.

Imports:

Send-out volumes last week from liquefied natural gas (LNG) terminals totaled about 0.7 billion cubic feet per day (Bcfd), which was 2.3 Bcfd less than the same time last year. Canadian imports last week were 7.4 Bcfd, which was 0.6 Bcfd less than last year.

Exploration and Production: 

The total U.S. oil and gas rig count decreased by 12 last week to 1,877 rigs. The Canadian rig count increased by 24 to 176 rigs. The Canadian National Energy Board said that Canadian natural-gas production has dropped by 1 Bcfd over the past year because of lower drilling activity.

Electricity:

Electricity generation for the week ending May 24 was 6 percent higher than the previous week and 0.2 percent lower than a year ago. Year-to-date electricity generation is 0.5 percent higher than last year.

Petroleum:

The NYMEX West Texas Intermediate (WTI) prompt-month contract settled at $127.35 per barrel (Bbl) on Friday, down $4.84/Bbl for the week. This was the first time in four weeks that oil prices posted a weekly decline. The American Automobile Association reported that the national average retail-gasoline price is now at a record $3.96 per gallon. The Commodity Futures Trading Commission (CFTC) announced that it is conducting an investigation of possible oil-price manipulation.

For the week ending May 23, crude-oil inventories decreased 8.8 million barrels (MMBbls), distillate inventories increased 1.6 MMBbls, and gasoline inventories decreased by 3.2 MMBbls. Crude-oil and gasoline inventory draws were much larger than expected. Oil inventories decreased because imports have dropped from 10.6 million barrels per day (MMBpd) three weeks ago to 9 MMBpd last week. U.S. refinery utilization was unchanged at 87.9 percent.

According to the EIA, gasoline demand is about 1 percent lower than this time last year. However, MasterCard said that gasoline purchases last week were off by 6 percent compared to last year.

The Department of Energy estimates that the demand for oil and refined products in the first quarter was 4.3 percent lower than a year earlier. OPEC said that it anticipates that global oil inventories will rise at a rate of over 400,000 barrels per day (Bpd) this year.

The Federal Highway Administration said that Americans drove 4.3 percent fewer miles in March compared to a year earlier. It was the first drop in driving in the month of March since 1979 and the largest annual drop in the agency’s history going back to 1942.

Militants in Nigeria attacked an oil pipeline and shut down 130,000 Bpd of oil production. Nigeria’s oil union threatened to strike after Shell announced that it would lay off 3,000 union workers during a restructuring.

Oil production in Mexico in April was 400,000 Bpd lower than a year earlier. The country’s production is now at a nine-year low. Iran’s oil production has dropped by 200,000 Bpd over the past month.

Indonesia has decided to drop out of OPEC because it is now a net importer of oil. Indonesia also decided to increase the cost of subsidized fuel in the country by 30 percent.

Economy:

The U.S. first quarter gross-domestic-product growth estimate was revised upward from 0.6 to 0.9 percent. U.S. consumer prices are 3.9 percent higher than a year ago. The Conference Board’s forward estimate of U.S. consumer inflation is now at 7.7 percent.

Dow Chemical announced that it will raise prices for its chemicals by 20 percent on June 1 because of rising fuel and feedstock prices. The company’s chemicals are used in many consumer products.

Existing home prices in the U.S. have fallen by 14.1 percent over the past year. However, the median price of a new home increased 1.5 percent from a year ago. The inventory of new homes is 10.6 months at the current sales rate. Sales of new homes rose in April, but the sales pace is at a 17-year low.

The U.S. Consumer Confidence Index is at a 16-year low. Orders for durable goods fell a less-than-anticipated 0.5 percent in April. However, orders, excluding transportation, increased 2.5 percent. Inflation-adjusted consumer spending in April was flat.

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