Summary

May 5, 2008

Natural Gas:

The NYMEX prompt-month contract decreased $0.18 per million British thermal units (MMBtu) to $10.78/MMBtu last week, and the 12-month NYMEX strip price decreased by $0.37/MMBtu to $11.06/MMBtu. The Henry Hub cash price decreased $0.35/MMBtu to $10.37/MMBtu.

Storage:

The Energy Information Administration (EIA) storage inventory for the week ending April 25 increased by 86 billion cubic feet (Bcf) to 1.371 trillion cubic feet (Tcf). The size of the injection was larger than expected. The storage level is 3 Bcf below the five-year average and 255 Bcf lower than the same period in 2007.

Weather:

This week, temperatures over most of the U.S. should be normal except for parts of the South which will be warmer than normal. The National Weather Service forecasts colder-than-normal weather over the northern half of the U.S. and warmer-than-normal weather along the Gulf Coast 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 2.6 Bcfd less than the same time last year. Canadian imports last week were 7.5 Bcfd, which was 0.8 Bcfd less than last year.

Exploration and Production: 

The total U.S. oil and gas rig count decreased by three last week to 1,839 rigs. The Canadian rig count increased by seven to 95 rigs.

Electricity:

Electricity generation for the week ending April 26 was 2.9 percent higher than the previous week and 2.2 percent higher than a year ago. Year-to-date electricity generation is 1.0 percent higher than last year.

Petroleum:

Oil prices fell last week because of an end to temporary supply disruptions and the strengthening of the U.S. dollar. The NYMEX West Texas Intermediate (WTI) prompt-month contract settled at $116.32 per barrel (Bbl) on Friday, down $2.20/Bbl for the week. During the week, oil prices traded at an all-time high of $119.93/Bbl on Monday and as low as about $110/Bbl on Thursday. The American Automobile Association (AAA) reported that the national average retail gasoline price is now at $3.62 per gallon. Gasoline prices fell $0.01 per gallon on Friday to break a streak of consecutive daily gains since April 14.

For the week ending April 25, crude-oil inventories increased 3.8 million barrels (MMBbls), distillate inventories increased 1.1 MMBbls, and gasoline inventories dropped by 1.5 MMBbls. Crude inventory gains were larger than expected and distillate inventories were expected to fall. Oil inventories increased because of higher imports and a drop in refinery throughput. U.S. refinery utilization decreased 0.2 percent to 85.4 percent.

The EIA reported that U.S. oil demand in February was 7 percent lower than a year ago. Weekly statistics shows that the four-week, moving-average oil demand is 1 percent lower than a year ago.

Production from ExxonMobil’s operations in Nigeria has resumed after about 800,000 barrels per day (Bpd) was shut-in for a week during a strike. Production on the UK Forties pipeline restarted after a two-day shut-in during a refinery strike. About 600,000 Bpd was affected. Workers in Nigeria and the UK agreed to return to work while unresolved issues are being negotiated.

Turkey initiated attacks on Kurdish rebels in northern Iraq. Exports from northern Iraq were uninterrupted during April. However, there is concern that the latest fighting could disrupt exports. Over the weekend, Shell reported that militants had attacked an oil facility and some production had been shut-in.

Economy:

The Federal Reserve lowered a key interest rate by 0.25 percent and indicated that it might be the last rate reduction during this cycle. The U.S. dollar strengthened this week in anticipation that the Federal Reserve is near the end of its interest rate reductions.

The U.S. economy lost 20,000 jobs in April, which was much less than anticipated. A separate survey showed that the unemployment rate fell from 5.1 percent to 5 percent. A total of 380,000 workers applied for new jobless claims last week.

The U.S. economy grew at an annualized rate of 0.6 percent in the first quarter. However, the economy would have contracted if not for a growth in inventories. If inventories continue to build, businesses might be forced to cut output and workers.

The first of the $110 billion tax rebates were released from the U.S. government last week. Consumer spending was up a higher-than-expected 0.4 percent in April. After adjusting for inflation, the increase was only 0.1 percent. Same store sales grew for the third time in four weeks. Home prices in 20 major cities dropped 12.7 percent in the past year. The number of foreclosures in the U.S. in the first quarter was more than double the number a year ago. Home vacancy rates in the first quarter were at an all-time high of 2.9 percent.

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