Natural Gas Pressure Factors

Commodities Fundamental: Gold, Natural Gas, Oil

Gold starts the week with strong fluctuations and high volatility affected by the mixed sentiment in the market. The volatility remains high for broad markets and for commodities in particular and the pressure on gold is still evident especially after the metal slipped below the psychological $1,500 areas.

The market was generally correcting the heavy losses seen last week on eased woes over Greece with rising expectations the parliament will endorse the austerity plan, while equities were also supported higher with the opening of U.S. markets as the new regulations for the banking sector were seen less severe than expected.

U.S. inflation as gauged by the Core PCE was still anchored with 1.2% rise on the year which also slipped more power from Gold that remained fragile with the commodity broad selloff still a dominant factor.

On Tuesday, the focus will remain on the debt crisis and the progress in Parliament as continued expectations for the austerity measures to pass will ease the haven demand on the metal yet likely to be countered by a weakening dollar on those terms.

The volatility is likely to remain high for the metal and lower inflation and debt woes most likely to keep the gains limited and also a weaker dollar on an optimistic sentiment over those terms will also restrain the metal from strong losses and therefore choppy trading is also most likely for Tuesday.

Natural gas prices were little changed on Monday, as traders continued to speculate that higher than average temperatures will boost demand for power-plant fuel, which overshadowed the bigger than expected rise in natural gas inventories reported on Thursday, and accordingly, natural gas prices continued to trade within a narrow range on Monday.

We should expect natural gas prices to rise back over the coming period on expectations of warmer than average weather conditions, as demand for power-plant fuel will increase, and that will support natural gas prices.

Finally, we should mention that the U.S. Income report on Monday showed that the personal income and spending declined in the month of May below expectations, and that confirms the weakness in the U.S. economic recovery. On Tuesday confidence data from the United States are expected with a slight rise which will somehow ease some of the jitters.

EIA Reports Hefty Nat Gas Build

The U.S. Energy Department’s weekly inventory release showed a larger-than-expected build-up in natural gas supplies on the back of robust production levels and moderate weather across much of the country.

The Weekly Natural Gas Storage Report – brought out by the Energy Information Administration (EIA) every Thursday since 2002 – includes updates on natural gas market prices, latest storage level estimates, recent weather data and other market activity or events.

The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of natural gas.

It is an indicator of current gas prices and volatility that affect businesses of natural gas-weighted companies and related support plays like Anadarko Petroleum Corp. ( APC ) , Chesapeake Energy ( CHK ) , EnCana Corp. ( ECA ) , Devon Energy Corp. ( DVN ) , Nabors Industries ( NBR ) , Patterson-UTI Energy ( PTEN ) , Helmerich & Payne ( HP ) and Halliburton Co. ( HAL ) .

Stockpiles held in underground storage in the lower 48 states rose by 98 billion cubic feet (Bcf) for the week ended June 17, 2011, higher than expectations (of 87–91 Bcf gain) of the analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc ( MHP ) .

The increase – the eleventh injection in as many weeks – is bigger than both the last year’s build-up of 81 Bcf and the 5-year (2006–2010) average build of 86 Bcf for the reported week. The current storage level, at 2.354 trillion cubic feet (Tcf), is down 258 Bcf (9.9%) from last year and is 64 Bcf (2.6%) below the five-year average.

A supply glut had pressured natural gas futures for most of 2010, as production from dense rock formations (shale) – through novel techniques of horizontal drilling and hydraulic fracturing – remained robust, thereby overwhelming demand.

Storage amounts hit a record high of 3.840 Tcf in November, while gas prices during the year fell 21%. As a matter of fact, natural gas prices have dropped nearly 70% from a peak of about $13.60 per million Btu (MMBtu) to the current level of around $4.20, in between sinking to a low of $2.50 in September 2009.

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Hand book of natural gas

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Proceedings [of the] annual convention

Engineering and mining journal