4-9-07 Energy Update

WEEKLY ENERGY MARKET UPDATE:

Friday (4/5) energy settlements:
May NYMEX gas: $7.607
May-October ’07: $7.90, Winter ’07-’08: $9.53
The NYMEX one-year strip $8.60, 2-year strip $8.62, 3-year $8.50
(Bid and Ask for these strips vary greatly)
Last 12-month average NYMEX: $6.64, Last Summer: $6.33
Last winter: $7.16
May Crude oil: $63.92, #2 oil $1.86

There was little activity in natural gas during the holiday shortened week, except increased short covering by large speculators. It is noteworthy that the Q2 highs of the past two years were constructed during the 1st to 19th of April, with the May contract expiring lower than April each year. I remain a cautious bear and suggest that you purchase a portion of your gas needs for this summer and even through November purely as insurance when May gas trades down to the $7.25 area. I hate to recommend buying in the upper half of the current trading range, but there are abundant stories the bulls can use to leverage prices up this summer.

Declining production and rising domestic demand will combine to reduce Canadian gas exports to the US by nearly 1 Bcf/d this summer. Most of this should be offset by increased LNG imports as liquefaction capacity in Nigeria and Trinidad increases and as Equatorial Guinea joins the list of LNG exporting nations. By 2008, US imports could reach 3 Bcf/d with increased output from Norway and Nigeria. New supplies are expected in 2008 from Qatar, Yemen, and Russia, if those projects can be completed on schedule.

Cove Point will shut down its terminal for the entire month of June as part of a major expansion scheduled to come online in September 2008.

Elba Island received a favorable environmental review to expand its storage and liquefaction facilities as well as for construction of a 187-mile pipeline that will increase maximum send out to 2.115 Bcf/d and more than double its storage capacity. Completion date for all projects is December 2012.

Please feel free to call me to discuss any questions you may have about your specific energy plan.