6-8-07 Energy Update

WEEKLY ENERGY MARKET UPDATE:

Friday (6/8) energy settlements:
July NYMEX gas: $7.663
Summer: July-October ’07: $7.845, Winter ’07-’08: $9.51
The NYMEX one-year strip $8.66, 2-year strip $8.76, 3-year $8.67
(Bid and Ask for these strips vary greatly)
Last 12-month average NYMEX: $6.864, Last Summer: $6.33
Last winter: $7.16
July Crude oil: $64.76, #2 oil $1.898

Natural gas continues to trade in its tightly defined range. The $7.50 to $7.60 area has been supportive for the past 8 weeks and I expect gas prices to support here again and then trade back above $8.00. If you have not bought any gas to get you through hurricane season, I suggest you buy through September or October when July trades on this support. If you are well hedged but wish to add incremental positions, set triggers to bottom fish in the July contract around $7.25. The July contract has traded lower than June in 5 of the last 6 years.

As of last week’s storage report, we have 2.163 Tcf in storage with another triple digit injection expected in this week’s report. Currently, injections of just over 56 Bcf per week would get us near last year’s all-time record high. Between good storage and a historically light storm season during June, pressure will stay on gas prices to move sideways or lower through the July 4th holiday.

The geographical price disparity was never more evident than last week. While New York daily delivered gas prices we $8.35/Dt, some CIG (Colorado Interstate Gas) had to be sold for $0.15/Dt on a day when the midpoint was $0.77. CIG prices recovered to $2.50 by week’s end, punctuating the value that Kinder Morgan’s Rockies Express (REX) pipeline will have on both markets after its 2008 completion.

NIMBY’s in the northeast have postponed the construction of gas pipelines, LNG facilities, and offshore exploration, but now construction has begun on New England’s first LNG port, 12 miles out to sea. The $200 M Excelerate Energy terminal will increase gas supplies to the region at a time when it leads the country in the growth of gas fired power generation.

In the Kurdish sector of northeastern Iraq the latest test well drilled in a new field flowed oil at a rate of 18,900 b/d from Cretaceous age rock. It is the 3rd test well drilled in the field with the prior ones flowing at 30,000 b/d, and 25,000 b/d. The average US oil well produces 10.1 barrels per day. For the geology buffs, the Cretaceous age was the youngest of the Mesozoic era, following the Triassic and Jurassic.

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