Friday, February 12, 2010 EST

Weekly EIA updates for energy shows projected energy consumption for 2010. Current high inventories have been bearish for energy including natural gas even with the large snowfall in the U.S.  In the short run lower energy prices should help boost consumer spending. Still over the next few months the outlook is for a sell in May and go away season for the market.

The MTR-TM helped members to go short or get out of long positions.  Ned Davis Research forecasts the market to rally later in February until the end of April. We will keep an eye to get back into the market long on the next MTR-TM signal.

Global Crude Oil and Liquid Fuels Consumption.  EIA has revised upward slightly its projections for global liquid fuels consumption growth in this Outlook, as the Asian-led recovery continues.  China's apparent liquid fuels consumption in December increased by 0.9 million barrels per day (bbl/d), or 12 percent, above year-earlier levels, as China's economic stimulus package continued to help push up both oil usage and economic growth. While Japan is expected to continue its long-term decline in consumption, signs of an economic turnaround in that country lead EIA to be less pessimistic about the Japanese decline in liquid fuels consumption for 2010-2011.  EIA's revised outlook is for global liquid fuels consumption to grow by 1.2 million bbl/d in 2010 and 1.6 million bbl/d in 2011 after showing annual declines in 2008 and 2009

Natural Gas Summary (EIA)
Working gas in storage was 2,215 Bcf as of Friday, February 5, 2010, according to EIA estimates. This represents a net decline of 191 Bcf from the previous week. Stocks were 172 Bcf higher than last year at this time and 114 Bcf above the 5-year average of 2,101 Bcf. In the East Region, stocks were 1 Bcf above the 5-year average following net withdrawals of 116 Bcf. Stocks in the Producing Region were 54 Bcf above the 5-year average of 682 Bcf after a net withdrawal of 60 Bcf. Stocks in the West Region were 60 Bcf above the 5-year average after a net drawdown of 15 Bcf. At 2,215 Bcf, total working gas is within the 5-year historical range.

Total marketed natural gas production declines 2.6 percent to 58.7 Bcf/d in 2010 and increases by 1.3 percent in 2011 in this forecast.  Working natural gas rigs hit a low of 665 in mid-July 2009, and EIA anticipates that the impact of lower drilling activity last year will contribute to the production decline in 2010.  While the number of working natural gas rigs is currently about 25 percent below the year-ago level, the number has increased during the last month by about 100 rigs to a total of 861 rigs at the end of January.  Current 2010 futures market prices between $5.50 and $6.70 per MMBtu appear to provide the necessary economic incentive to expand drilling programs even further.  As a result, EIA expects monthly natural gas production to begin to slowly increase later this year and continue on an upward trend through the end of 2011.


Gasoline and Diesel Fuel Prices Fall for Fourth Week (EIA)
The U.S. average price for regular gasoline fell for the fourth week in a row, dropping less than a penny to reach $2.65 per gallon, which was still $0.73 above last year. On the East Coast, the price decreased almost two cents to $2.67 per gallon. The Midwest average increased by over a penny to $2.57 per gallon, and Rocky Mountain prices rose by less than half a cent to $2.62 per gallon. Gulf Coast average prices fell almost 3 cents to $2.52 per gallon and remained the lowest regional prices in the Nation. The West Coast average dropped close to 2 cents to $2.90 per gallon and the price in California decreased over a penny to $2.96 per gallon.

Gasoline stocks above high end of the range for this time of the year and add in tax return season it would seem to be a postive vote for consumer spending.