By Asjylyn Loder
http://www.bloomberg.com/apps/news?pid=20601082&sid=aqc8Zgwp_Vpc
Sept. 18 (Bloomberg) -- Two Canadian exchange-traded funds that aim to return double the performance of natural gas, both up and down, have reached record volumes as traders try to profit from the fuel’s volatility.
Volume in the Horizons BetaPro Nymex Natural Gas Bull Plus ETF reached a high on Sept. 16 of 23.6 million shares, and the Horizons BetaPro Nymex Natural Gas Bear Plus ETF set a record yesterday of 16.9 million shares traded.
“Investors could be looking to make up lost ground from the recession, which adds to the appeal of leveraged and inverse funds,” said Tom Lydon, president and chief executive officer at Global Trends Investments in Newport Beach, California. “Investors could be feeling confident about the direction of natural gas and feel secure in ‘doubling down.’”
Volatility in the natural gas market has reached its highest point since September 2006, when hedge fund Amaranth Advisors LLC collapsed because of losses on its natural gas bets.
The volatility has attracted investors hoping to amplify their returns through the leveraged funds, said Adam Felesky, chief executive officer of Toronto-based BetaPro Management Inc., which manages the two Canadian ETFs.
“The increased volatility we’ve seen in natural gas has presented huge potential returns, or losses I guess, for individuals who want that exposure,” Felesky said.
The Bull ETF tries to deliver double the return of the near-month natural gas contract on the New York Mercantile Exchange. The Bear fund seeks daily results that are two times the inverse of the future, rising when gas falls.
Gas Decline
Natural gas on the Nymex has fallen 33 percent this year, while the Bull fund has dropped 85 percent and the Bear fund has risen 78 percent. The funds rebalance daily, compounding their tracking error over time.
Natural gas rose 32 cents, or 9.3 percent, to $3.778 per million British thermal units today on the Nymex.
The C$998 million ($933 million) Bull fund traded 17.2 million shares today, rising 90 Canadian cents, or 6.3 percent, to C$15.12. The Bear fund fell 45 Canadian cents, or 7.2 percent, to C$5.80, with 16.5 million shares changing hands.
The 20-month-old funds have been growing in popularity since early July, when the U.S. Natural Gas Fund, traded under the ticker UNG, ran out of new shares. The Alameda, California- based fund is largest ETF in the fuel.
UNG, which ran out of new shares on July 7, began trading at a premium to its underlying natural gas assets. The premium grew after the fund said on Aug. 12 that it couldn’t issue 1 billion new shares approved by the Securities and Exchange Commission because of tightening position limits on energy speculation.
Alternative Fund
Investors turned to the iPath Dow Jones-UBS Natural Gas Total Return Sub-Index exchange-traded note until Barclays Bank PLC stopped issuing new notes on Aug. 21 because of the tighter position limits from the Commodity Futures Trading Commission. The notes also began trading at a premium.
“People likely started looking for alternatives to UNG,” said Scott Becker, an equity derivatives strategies at Jefferies Group Inc. in New York. The Canadian double-long fund provides “cheap leverage” and “probably benefited from the alternatives trading at a premium,” he said.
The 15-day average volume in the Bull fund more than tripled since the start of July to 16.2 million shares a day, up from an average of 4.94 million shares a day from the launch of the fund in January 2008 through the end of June. Average volume in the Bear fund more than doubled in that time to 9.65 million shares a day from 3.72 million.
Rapid Turnover
Shares in both funds turn over quickly, indicating that most investors are making short-term bets, Felesky said. The implied turnover of the Bull fund is every three days, while shares at the Bear fund are turning over daily, he said.
“Investors should make sure they understand leveraged ETFs, though,” Lydon said in an e-mail yesterday. “Don’t get into them if you don’t know how they work or you could get burned.”
The Financial Industry Regulatory Authority, the largest independent regulator for securities firms in the U.S., and the SEC issued a joint statement in August highlighting the risks leveraged and inverse products posed, including performance that can be unpredictable because of daily compounding.
Leveraged and inverse ETFs are extremely volatile and not well suited to buy-and-hold investors who don’t want to regularly rebalance their investment, said Bradley Kay, an ETF analyst with Morningstar Inc. in Chicago, in an interview yesterday.
“How much risk have you already taken on jumping into a commodity market that’s already volatile?” Kay said. “And you want to throw leverage on top of that? It’s a bit of a recipe for disaster if you’re looking for predictability in your portfolio.”
To contact the reporter on this story: Asjylyn Loder in New York aloder@bloomberg.net.
Last Updated: September 18, 2009 16:48 EDT
Sunday, September 20, 2009
Saturday, September 19, 2009
Natural Gas Prices Good Up this Week - 9.18.2009
By CHRIS KAHN (AP) – 8 hours ago
http://www.google.com/hostednews/ap/article/ALeqM5i4_q7DtiEHvUTVNlJoaJ9ufkd1kgD9APTJPG0
NEW YORK — Natural gas prices have mostly moved in one direction this summer, down, and the vast caverns that hold it are close to reaching capacity. Yet since the beginning of the month prices have spiked 44 percent.
A record number of futures contracts were snapped up this week, most likely because buyers didn't see prices for natural gas getting much cheaper.
The jump in price would certainly be a troubling sign for people who use natural gas to heat their homes, save for the fact that, even with a 28 percent run-up this week, prices are still about a third of they were last year.
It's extremely cheap and no one expects that to change anytime soon.
"It's going to be very good winter for natural gas customers," analyst and trader Stephen Schork said.
Natural gas for October delivery added 32 cents Friday to settle at $3.778 per 1,000 cubic feet on the New York Mercantile Exchange.
All other types of fuel sank. Benchmark crude for October delivery gave up 43 cents to settle at $72.04 a barrel.
Just as oil prices spiked and then leveled off earlier this year, natural gas prices jumped more than 44 percent after sinking to $2.40 per 1,000 cubic feet on Sept. 4.
Investors flooded the market and natural gas futures reached a record 404,450 contracts on Tuesday, according to derivatives market CME Group.
The reason consumers and businesses that use a lot of electricity needn't worry is simple. The supply of natural gas is enormous.
American power plants are using a lot less natural gas because the recession has sapped demand for power. Stockpiles are quickly approaching the limit for what can be stored in underground caverns, and producers may start pushing excess supplies onto the open market.
"Where else will it go? We're not going to be able to put any more gas into the ground," Schork said.
The government said Thursday that there is nearly 3.5 trillion cubic feet of natural gas in storage, 16.4 percent more the five-year average for this time of year.
Analyst Addison Armstrong estimates that if producers keep pumping more gas into storage, the country's stockpiles will surpass the previous record of 3.545 trillion cubic feet in the next seven weeks.
It's not just natural gas, either.
The Energy Information Administration said Wednesday that the country is sitting on a sea of distillate fuels including heating oil, with stockpiles approaching a 27-year high. U.S. crude stockpiles are 14 percent larger than last year.
Other than natural gas, prices on Nymex sank to end the week.
Gasoline for October delivery slipped 1.88 cents to settle at $1.8324 a gallon, and heating oil fell 1.3 cents to settle at $1.8279 a gallon.
At the pump, retail gas prices were unchanged at $2.55 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 7.8 cents cheaper than last month and $1.285 cheaper than a year ago.
In London, Brent crude fell 23 cents to settle at $71.55 on the ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.
Copyright © 2009 The Associated Press. All rights reserved.
http://www.google.com/hostednews/ap/article/ALeqM5i4_q7DtiEHvUTVNlJoaJ9ufkd1kgD9APTJPG0
NEW YORK — Natural gas prices have mostly moved in one direction this summer, down, and the vast caverns that hold it are close to reaching capacity. Yet since the beginning of the month prices have spiked 44 percent.
A record number of futures contracts were snapped up this week, most likely because buyers didn't see prices for natural gas getting much cheaper.
The jump in price would certainly be a troubling sign for people who use natural gas to heat their homes, save for the fact that, even with a 28 percent run-up this week, prices are still about a third of they were last year.
It's extremely cheap and no one expects that to change anytime soon.
"It's going to be very good winter for natural gas customers," analyst and trader Stephen Schork said.
Natural gas for October delivery added 32 cents Friday to settle at $3.778 per 1,000 cubic feet on the New York Mercantile Exchange.
All other types of fuel sank. Benchmark crude for October delivery gave up 43 cents to settle at $72.04 a barrel.
Just as oil prices spiked and then leveled off earlier this year, natural gas prices jumped more than 44 percent after sinking to $2.40 per 1,000 cubic feet on Sept. 4.
Investors flooded the market and natural gas futures reached a record 404,450 contracts on Tuesday, according to derivatives market CME Group.
The reason consumers and businesses that use a lot of electricity needn't worry is simple. The supply of natural gas is enormous.
American power plants are using a lot less natural gas because the recession has sapped demand for power. Stockpiles are quickly approaching the limit for what can be stored in underground caverns, and producers may start pushing excess supplies onto the open market.
"Where else will it go? We're not going to be able to put any more gas into the ground," Schork said.
The government said Thursday that there is nearly 3.5 trillion cubic feet of natural gas in storage, 16.4 percent more the five-year average for this time of year.
Analyst Addison Armstrong estimates that if producers keep pumping more gas into storage, the country's stockpiles will surpass the previous record of 3.545 trillion cubic feet in the next seven weeks.
It's not just natural gas, either.
The Energy Information Administration said Wednesday that the country is sitting on a sea of distillate fuels including heating oil, with stockpiles approaching a 27-year high. U.S. crude stockpiles are 14 percent larger than last year.
Other than natural gas, prices on Nymex sank to end the week.
Gasoline for October delivery slipped 1.88 cents to settle at $1.8324 a gallon, and heating oil fell 1.3 cents to settle at $1.8279 a gallon.
At the pump, retail gas prices were unchanged at $2.55 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 7.8 cents cheaper than last month and $1.285 cheaper than a year ago.
In London, Brent crude fell 23 cents to settle at $71.55 on the ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.
Copyright © 2009 The Associated Press. All rights reserved.
Friday, September 18, 2009
Natural Gas Boys to Spend Money in Washington D.C.
By DAVE MICHAELS / The Dallas Morning News
dmichaels@dallasnews.com
http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-gaslobby_18bus.ART.State.Edition1.3cf7a43.html
WASHINGTON – Natural gas producers are planning a major lobbying effort to shape climate change legislation in the Senate, aiming for incentives to boost the use of their resource in power plants and vehicles.
The aggressive push is meant to make up for the gas lobby's relative absence from climate-change negotiations in the House, where a bill that passed in June reserved most goodies for coal-burning utilities and manufacturers seeking incentives to shield them from the cost of reducing greenhouse gas emissions.
"It's only when legislation is introduced that changes it from a level playing field to an unlevel playing field that we say, 'Wait a minute, you are rewarding those fuels that are less clean than natural gas,' " said Larry Nichols, chief executive of Oklahoma City-based Devon Energy.
For many of the companies, Washington's preference for coal couldn't come at a worse time. After several years of high prices and massive new discoveries such as North Texas' Barnett Shale, the price of gas has fallen to a seven-year low.
A supply glut is partly to blame. So gas kingpins like Dallas' T. Boone Pickens have asked Congress to underwrite new uses for natural gas, including a program to convert trucking fleets from diesel to natural gas.
Other gas producers are also touting the fuel's green credentials, since it emits 50 percent less carbon dioxide than coal. They emphasize that new fields are near East Coast cities – trying to break the view that gas is found only in Texas and Louisiana – and echo Pickens' argument that domestically produced gas could help reduce oil imports.
The gas lobby's new outfit, the America's Natural Gas Alliance, plans an $80 million campaign to tout its aims with ads in national and regional publications. The group is united in opposition to new oil and gas taxes proposed by the Obama administration, as well as a House bill that would federally regulate hydraulic fracturing – the water-and-chemical-infused drilling method used to produce most gas in the U.S.
They're also winning some allies in the environmental lobby. The Sierra Club, for instance, agrees that natural gas could be a bridge fuel as power plants reduce their use of coal. On Thursday, Sierra Club executive director Carl Pope lobbied Capitol Hill along with Aubrey McClendon, chairman and chief executive of Chesapeake Energy, one of the biggest players in the Barnett Shale.
"Basically, the House promised coal that it will get a shot at the future by investing heavily" in clean coal, said Dave Hamilton, director of global warming and energy programs for the Sierra Club. "The problem is by not inserting incentives for fuel switching, they are just passing on what are millions and millions of tons of quick carbon dioxide reductions."
The gas lobby wants senators to create a "bridge fuel credit," which would reward utilities that switch from coal to natural gas.
Fuel switching raises concerns in Texas, where gas price volatility has wreaked havoc with consumers' electric bills. The gas producers say today's huge reserves mean that gas won't be in short supply anytime soon, so prices are likely to stay between $5 and $8 per thousand cubic feet.
"Abundance is what will ensure price stability," said David Trice, chairman of Newfield Exploration Co., a Houston-based independent oil and gas producer.
dmichaels@dallasnews.com
http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-gaslobby_18bus.ART.State.Edition1.3cf7a43.html
WASHINGTON – Natural gas producers are planning a major lobbying effort to shape climate change legislation in the Senate, aiming for incentives to boost the use of their resource in power plants and vehicles.
The aggressive push is meant to make up for the gas lobby's relative absence from climate-change negotiations in the House, where a bill that passed in June reserved most goodies for coal-burning utilities and manufacturers seeking incentives to shield them from the cost of reducing greenhouse gas emissions.
"It's only when legislation is introduced that changes it from a level playing field to an unlevel playing field that we say, 'Wait a minute, you are rewarding those fuels that are less clean than natural gas,' " said Larry Nichols, chief executive of Oklahoma City-based Devon Energy.
For many of the companies, Washington's preference for coal couldn't come at a worse time. After several years of high prices and massive new discoveries such as North Texas' Barnett Shale, the price of gas has fallen to a seven-year low.
A supply glut is partly to blame. So gas kingpins like Dallas' T. Boone Pickens have asked Congress to underwrite new uses for natural gas, including a program to convert trucking fleets from diesel to natural gas.
Other gas producers are also touting the fuel's green credentials, since it emits 50 percent less carbon dioxide than coal. They emphasize that new fields are near East Coast cities – trying to break the view that gas is found only in Texas and Louisiana – and echo Pickens' argument that domestically produced gas could help reduce oil imports.
The gas lobby's new outfit, the America's Natural Gas Alliance, plans an $80 million campaign to tout its aims with ads in national and regional publications. The group is united in opposition to new oil and gas taxes proposed by the Obama administration, as well as a House bill that would federally regulate hydraulic fracturing – the water-and-chemical-infused drilling method used to produce most gas in the U.S.
They're also winning some allies in the environmental lobby. The Sierra Club, for instance, agrees that natural gas could be a bridge fuel as power plants reduce their use of coal. On Thursday, Sierra Club executive director Carl Pope lobbied Capitol Hill along with Aubrey McClendon, chairman and chief executive of Chesapeake Energy, one of the biggest players in the Barnett Shale.
"Basically, the House promised coal that it will get a shot at the future by investing heavily" in clean coal, said Dave Hamilton, director of global warming and energy programs for the Sierra Club. "The problem is by not inserting incentives for fuel switching, they are just passing on what are millions and millions of tons of quick carbon dioxide reductions."
The gas lobby wants senators to create a "bridge fuel credit," which would reward utilities that switch from coal to natural gas.
Fuel switching raises concerns in Texas, where gas price volatility has wreaked havoc with consumers' electric bills. The gas producers say today's huge reserves mean that gas won't be in short supply anytime soon, so prices are likely to stay between $5 and $8 per thousand cubic feet.
"Abundance is what will ensure price stability," said David Trice, chairman of Newfield Exploration Co., a Houston-based independent oil and gas producer.
Thursday, September 17, 2009
Natural Gas and Oil Program Ended by Interior Department
http://www.google.com/hostednews/ap/article/ALeqM5hg09yOG0W7PEKcAmxcFsN9yoJCVAD9AOH0H85
Interior ends troubled oil royalty program
By H. JOSEF HEBERT (AP) – 5 hours ago
WASHINGTON — The Interior Department said Wednesday it is ending a controversial program that allows companies to give the government in-kind payments instead of cash for oil and natural gas taken from federal land and waters.
The royalty-in-kind program has been criticized for lax enforcement that has cost the federal government tens of millions of dollars in royalty payments. It also was at the center last year of a sex and drug scandal involving employees of the office in charge of Interior's offshore energy leasing program.
Interior Secretary Ken Salazar said the program "has been a blemish on the department" and has "created problems and ethical lapses" among those who managed it.
"It's time for us to end the royalty-in-kind program," Salazar told a House hearing, promising to phase out the program in an orderly manner in favor of cash collections. About half of the more than $12 billion in oil and gas royalties are collected through the in-kind program.
Under the program, instead of cash, companies provide the government a comparably valued amount of oil or gas. Then the government sells the products on the open market.
Ending the in-kind program is the first step in a broader overhaul planned by Salazar of the leasing program.
"Bravo, bravo, bravo," responded Rep. Nick Rahall, D-W.Va., chairman of the Natural Resources Committee and a sharp critic of the leasing program and the way it's been managed. Rahall said a return to cash royalty payments "will end the opportunity for mischief, or the temptation, and perhaps provide a more decent return for the American taxpayer."
Rahall said a General Accounting Office report, to be presented in later testimony, estimated that the federal government may have lost as much as $160 million in royalties from oil and gas taken from offshore waters because of erroneous and missing information provided by oil and gas companies. Another GAO report released this week said the government may be owed $21 million — and risks losing millions more — because Interior officials are not adequately verifying how much companies produce from offshore leases.
It was not clear how much of the lost revenue was attributed directly to the in-kind payments.
The government in fiscal 2008 collected more than $12 billion in royalties from oil and gas production in federal coastal waters, mostly in the western Gulf of Mexico, of which $6.6 billion came through the royalty-in-kind program, according to the General Accounting Office. The Interior Department had somewhat lower numbers for the in-kind program, but does not include oil that is collected, but goes directly to the government's Strategic Petroleum Reserve.
The oil industry has favored the in-kind approach, which was significantly expanded during the Bush administration.
"The program is an effective means of ensuring that the American people receive fair compensation for development of federal resources," said Jack Gerard, president of the American Petroleum Institute, which represents the large oil companies.
"Terminating this straightforward method of handling royalty payments runs the risk of raising administrative costs and adding additional layers of paperwork required to determine the value of oil and gas production," Gerard said in a statement.
Copyright © 2009 The Associated Press. All rights reserved.
Interior ends troubled oil royalty program
By H. JOSEF HEBERT (AP) – 5 hours ago
WASHINGTON — The Interior Department said Wednesday it is ending a controversial program that allows companies to give the government in-kind payments instead of cash for oil and natural gas taken from federal land and waters.
The royalty-in-kind program has been criticized for lax enforcement that has cost the federal government tens of millions of dollars in royalty payments. It also was at the center last year of a sex and drug scandal involving employees of the office in charge of Interior's offshore energy leasing program.
Interior Secretary Ken Salazar said the program "has been a blemish on the department" and has "created problems and ethical lapses" among those who managed it.
"It's time for us to end the royalty-in-kind program," Salazar told a House hearing, promising to phase out the program in an orderly manner in favor of cash collections. About half of the more than $12 billion in oil and gas royalties are collected through the in-kind program.
Under the program, instead of cash, companies provide the government a comparably valued amount of oil or gas. Then the government sells the products on the open market.
Ending the in-kind program is the first step in a broader overhaul planned by Salazar of the leasing program.
"Bravo, bravo, bravo," responded Rep. Nick Rahall, D-W.Va., chairman of the Natural Resources Committee and a sharp critic of the leasing program and the way it's been managed. Rahall said a return to cash royalty payments "will end the opportunity for mischief, or the temptation, and perhaps provide a more decent return for the American taxpayer."
Rahall said a General Accounting Office report, to be presented in later testimony, estimated that the federal government may have lost as much as $160 million in royalties from oil and gas taken from offshore waters because of erroneous and missing information provided by oil and gas companies. Another GAO report released this week said the government may be owed $21 million — and risks losing millions more — because Interior officials are not adequately verifying how much companies produce from offshore leases.
It was not clear how much of the lost revenue was attributed directly to the in-kind payments.
The government in fiscal 2008 collected more than $12 billion in royalties from oil and gas production in federal coastal waters, mostly in the western Gulf of Mexico, of which $6.6 billion came through the royalty-in-kind program, according to the General Accounting Office. The Interior Department had somewhat lower numbers for the in-kind program, but does not include oil that is collected, but goes directly to the government's Strategic Petroleum Reserve.
The oil industry has favored the in-kind approach, which was significantly expanded during the Bush administration.
"The program is an effective means of ensuring that the American people receive fair compensation for development of federal resources," said Jack Gerard, president of the American Petroleum Institute, which represents the large oil companies.
"Terminating this straightforward method of handling royalty payments runs the risk of raising administrative costs and adding additional layers of paperwork required to determine the value of oil and gas production," Gerard said in a statement.
Copyright © 2009 The Associated Press. All rights reserved.
Wednesday, September 16, 2009
Natural Gas Prices Rise Again
By CHRISTINE BUURMA
http://online.wsj.com/article/SB125294891047209263.html
NEW YORK -- Natural-gas futures soared Monday, driven by predictions the market has reached a floor as the winter heating season approaches.
Natural gas for October delivery on the New York Mercantile Exchange settled 33.7 cents, or 11%, higher at $3.297 a million British thermal units after reaching a high of $3.375 earlier in the day.
Gas traders, who have been betting heavily on falling prices over the past several months, have rushed to buy back previously sold contracts after the market fell to a 7½-year low in early September. Spurts of bargain buying have often been followed by selloffs the following day, causing wild price fluctuations, as when gas for October delivery fell 9% Friday after rallying 15% the previous day.
"We're rebounding off of Friday's price decline," said Pax Saunders, an analyst with Gelber & Associates, a Houston energy-advisory firm. "I think the market's now stalling here and looking for its next meaningful peak."
Traders have been trying to gauge whether an oversupply of the fuel and tepid demand will continue to depress prices, or whether a cold winter, drilling cutbacks and hints of economic recovery will send prices rallying in the coming months.
Gas prices often rise in September as traders look ahead to the winter, when demand for the fuel used to heat homes and businesses rises. Still, the front-month Nymex futures contract is down 55% from a year ago, and total gas in U.S. inventories as of Sept. 4 stood at 3.392 trillion cubic feet, about 17% higher than the five-year average and the year-earlier level.
Meanwhile, moderate temperatures as fall arrives are likely to limit demand for gas, adding to the glut. Meteorologists were predicting mostly normal temperatures across the eastern two-thirds of the U.S. through Oct. 14.
"With weather conditions still moderate around the country and industrial demand still severely constricted, prices will not be able to rally too far in the near term," wrote Mike Fitzpatrick, a broker with MF Global in New York, in a note to clients Monday.
In other commodity markets
SUGAR: Prices rose, supported by speculative buying as the market moved above an important technical chart level. Nearby October ICE Futures U.S. sugar rose 0.85 cent to 22.06 cents a pound.
COFFEE: Prices hit a four-week high, as roasters bought following recent price weakness. ICE December coffee rose 6.45 cents to $1.3310 a pound.
Write to Christine Buurma at christine.buurma@dowjones.com
Printed in The Wall Street Journal, page C8
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit
www.djreprints.com
http://online.wsj.com/article/SB125294891047209263.html
NEW YORK -- Natural-gas futures soared Monday, driven by predictions the market has reached a floor as the winter heating season approaches.
Natural gas for October delivery on the New York Mercantile Exchange settled 33.7 cents, or 11%, higher at $3.297 a million British thermal units after reaching a high of $3.375 earlier in the day.
Gas traders, who have been betting heavily on falling prices over the past several months, have rushed to buy back previously sold contracts after the market fell to a 7½-year low in early September. Spurts of bargain buying have often been followed by selloffs the following day, causing wild price fluctuations, as when gas for October delivery fell 9% Friday after rallying 15% the previous day.
"We're rebounding off of Friday's price decline," said Pax Saunders, an analyst with Gelber & Associates, a Houston energy-advisory firm. "I think the market's now stalling here and looking for its next meaningful peak."
Traders have been trying to gauge whether an oversupply of the fuel and tepid demand will continue to depress prices, or whether a cold winter, drilling cutbacks and hints of economic recovery will send prices rallying in the coming months.
Gas prices often rise in September as traders look ahead to the winter, when demand for the fuel used to heat homes and businesses rises. Still, the front-month Nymex futures contract is down 55% from a year ago, and total gas in U.S. inventories as of Sept. 4 stood at 3.392 trillion cubic feet, about 17% higher than the five-year average and the year-earlier level.
Meanwhile, moderate temperatures as fall arrives are likely to limit demand for gas, adding to the glut. Meteorologists were predicting mostly normal temperatures across the eastern two-thirds of the U.S. through Oct. 14.
"With weather conditions still moderate around the country and industrial demand still severely constricted, prices will not be able to rally too far in the near term," wrote Mike Fitzpatrick, a broker with MF Global in New York, in a note to clients Monday.
In other commodity markets
SUGAR: Prices rose, supported by speculative buying as the market moved above an important technical chart level. Nearby October ICE Futures U.S. sugar rose 0.85 cent to 22.06 cents a pound.
COFFEE: Prices hit a four-week high, as roasters bought following recent price weakness. ICE December coffee rose 6.45 cents to $1.3310 a pound.
Write to Christine Buurma at christine.buurma@dowjones.com
Printed in The Wall Street Journal, page C8
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit
www.djreprints.com
Tuesday, September 15, 2009
Natural Gas Price on September 14, 2009 is UP at $3.29/mcf
By DIRK LAMMERS (AP) – 4 hours ago
Natural gas demonstrated again how much it has split from the direction of crude, as prices spiked more than 13 percent despite an enormous glut in supply.
Crude prices fell for the second straight trading day.
Analysts at Goldman Sachs said prices for natural gas may even triple over the winter, though most energy experts believe there is a far greater chance that prices will plunge again.
There are two big factors that support the latter view, which would mean extremely cheap heating bills for a lot of people over the next few months.
The first is that natural gas in storage is 17 percent greater than it was last year and has even neared the maximum storage capacity in some places. And the U.S Energy Information Administration said in its short-term energy outlook that it expects another 12 percent buildup through October.
At the same time meteorologists predict a very mild winter for most of the country. With demand already way down from industrial utility customers, the U.S. has an enormous amount of unused natural gas.
Natural gas prices settled 33.7 cents higher at $3.297 per 1,000 cubic feet.
Meanwhile, managers of the United States Natural Gas fund, an exchange-traded fund that tracks natural gas prices, said it will again offer shares before the end of the month. The fund allows any investor to buy shares, which UNG uses to buy natural gas contracts on Nymex and the ICE Futures exchange.
UNG shares have been selling at a premium because they are in short supply. The fund over the summer sought permission from the Securities and Exchange Commission to offer another billion units.
Contrary to how they have traded in the past, natural gas and crude futures have taken divergent paths throughout the year, and that was true again on Monday.
Benchmark crude for October delivery fell 43 cents to settle at $68.86 a barrel. On Friday, the contract tumbled $2.65 to settle at $69.29.
A lot of pressure has been placed on the dollar-based crude because the dollar has rebounded in recent days. Still, prices have doubled from earlier this year during what may have been the depth of the recession.
A lot of experts believe that optimism is premature on both counts because crude now held in in storage, like natural gas, remains at very high levels.
"At some point hope has to become a reality or prices will have to adjust accordingly," said PFGBest analyst Phil Flynn.
At the pump, the average price for a gallon of regular gasoline fell a tenth of a cent to $2.572, according to auto club AAA, Wright Express and Oil Price Information Service. That's 7.3 cents more than a month ago, but $1.22 less than at this time last year.
Gasoline for October delivery on the Nymex fell 1.65 cents to settle at $1.7433 a gallon.
Prices have most certainly peaked for most motorists this year, barring some disruption in the Gulf of Mexico.
"The 'driving season' is over ... and supplies are greater today than in May," analyst and trader Stephen Schork wrote in his morning report.
In other Nymex trading, heating oil for October delivery rose 1.14 cents to settle at $1.7422 a gallon.
In London, Brent crude fell 13 cents to $67.56 on the ICE Futures exchange.
Associated Press Writers Pablo Gorondi in Budapest, Hungary, Alex Kennedy in Singapore and Stephen Bernard in New York contributed to this report.
Copyright © 2009 The Associated Press. All rights reserved.
Natural gas demonstrated again how much it has split from the direction of crude, as prices spiked more than 13 percent despite an enormous glut in supply.
Crude prices fell for the second straight trading day.
Analysts at Goldman Sachs said prices for natural gas may even triple over the winter, though most energy experts believe there is a far greater chance that prices will plunge again.
There are two big factors that support the latter view, which would mean extremely cheap heating bills for a lot of people over the next few months.
The first is that natural gas in storage is 17 percent greater than it was last year and has even neared the maximum storage capacity in some places. And the U.S Energy Information Administration said in its short-term energy outlook that it expects another 12 percent buildup through October.
At the same time meteorologists predict a very mild winter for most of the country. With demand already way down from industrial utility customers, the U.S. has an enormous amount of unused natural gas.
Natural gas prices settled 33.7 cents higher at $3.297 per 1,000 cubic feet.
Meanwhile, managers of the United States Natural Gas fund, an exchange-traded fund that tracks natural gas prices, said it will again offer shares before the end of the month. The fund allows any investor to buy shares, which UNG uses to buy natural gas contracts on Nymex and the ICE Futures exchange.
UNG shares have been selling at a premium because they are in short supply. The fund over the summer sought permission from the Securities and Exchange Commission to offer another billion units.
Contrary to how they have traded in the past, natural gas and crude futures have taken divergent paths throughout the year, and that was true again on Monday.
Benchmark crude for October delivery fell 43 cents to settle at $68.86 a barrel. On Friday, the contract tumbled $2.65 to settle at $69.29.
A lot of pressure has been placed on the dollar-based crude because the dollar has rebounded in recent days. Still, prices have doubled from earlier this year during what may have been the depth of the recession.
A lot of experts believe that optimism is premature on both counts because crude now held in in storage, like natural gas, remains at very high levels.
"At some point hope has to become a reality or prices will have to adjust accordingly," said PFGBest analyst Phil Flynn.
At the pump, the average price for a gallon of regular gasoline fell a tenth of a cent to $2.572, according to auto club AAA, Wright Express and Oil Price Information Service. That's 7.3 cents more than a month ago, but $1.22 less than at this time last year.
Gasoline for October delivery on the Nymex fell 1.65 cents to settle at $1.7433 a gallon.
Prices have most certainly peaked for most motorists this year, barring some disruption in the Gulf of Mexico.
"The 'driving season' is over ... and supplies are greater today than in May," analyst and trader Stephen Schork wrote in his morning report.
In other Nymex trading, heating oil for October delivery rose 1.14 cents to settle at $1.7422 a gallon.
In London, Brent crude fell 13 cents to $67.56 on the ICE Futures exchange.
Associated Press Writers Pablo Gorondi in Budapest, Hungary, Alex Kennedy in Singapore and Stephen Bernard in New York contributed to this report.
Copyright © 2009 The Associated Press. All rights reserved.
Monday, September 14, 2009
Natural Gas Project for Chevron in Australia
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/12/BU3T19LPOU.DTL
Andrew S. Ross
Sunday, September 13, 2009
Even by its own standards, Chevron Corp.'s latest deal is big. And it has nothing to do with crude oil. The San Ramon company is about to officially sign off on a contract involving 40 trillion cubic feet of natural gas to be tapped in Australia and shipped in super-cool, liquid form to burgeoning energy markets in China and elsewhere
"On a capital basis, it will be our largest project ever," said a Chevron spokesman. He would not put a dollar amount on the investment in Australia's vast Gorgon field, but estimates put the total cost, shared with ExxonMobil and Royal Dutch Shell, Chevron's minority partners in the project, at $40 billion.
The payoff is likely to be enormous. Australian Prime Minister Kevin Rudd said the liquefied natural gas sales from the Gorgon field could total $249 billion over 20 years. Japan and South Korea have committed to buying $60 billion worth of the fuel from Chevron once the gas starts pumping in 2014.
A Chinese energy company already struck a $41 billion deal with ExxonMobil, which like Royal Dutch Shell has a 25 percent stake in the project. Expect more such agreements to be announced in the coming weeks.
The project ( www.gorgon.com.au) has passed muster with the environmentally conscious Australian government. Lloyd Avram, a Chevron spokesman, said the project "underwent a rigorous environmental assessment" that resulted in "stringent conditions." Among Chevron's initiatives are plans to build a giant carbon dioxide injection facility in the area, and special lighting technologies to protect flatback turtles on Barrow Island, a protected nature reserve, where the gas is to be processed.
"Gorgon is a key part of Chevron's future," said Avram. "The project feeds long-term demand for natural gas in the growing Asia-Pacific region. It also highlights the importance of Australia to Chevron's gas strategy, commercializing our equity gas resource base to grow a global gas business."
"It transforms Chevron's portfolio," was the way Robin West, CEO of PFC Energy Inc., a global energy consultancy, put it to the Financial Times.
Reading material: Looking for something to commemorate "Lehman weekend," the first anniversary of the Lehman Bros. collapse and the ensuing worldwide crash? Check out "A Colossal Failure of Common Sense," by Lawrence McDonald, a former Lehman VP who was present at the destruction. It's a real page-turner.
Apart from Lehman's own astounding follies, there are lots of local contributors to McDonald's bird's-eye view of the madness. They include the city of Stockton, pioneer of the "NINJA" mortgage ("no income, no job, no assets"), San Jose's Calpine Corp., a prime example of a "crazily overleveraged U.S. corporation" with its "now-you-see-it-now-you-don't-balance sheet," and former S.F. Supervisor Roberta Achtenberg, who as an assistant secretary at HUD pushed banks to provide what turned out to be disastrous mortgages to low-income and minority borrowers.
McDonald's biggest villains are former Lehman CEO Richard Fuld and his toady, the firm's president, Joe Gregory, both of whom give whole new meanings to the word hubris, not to mention "dumb and dumber," as they allowed, nay encouraged, Lehman to compile "almost three quarters of a trillion dollars of pure, unadulterated risk." That brought Lehman, plus Wall Street and much of the financial world, down, in his view.
"It never should have happened," McDonald concludes. If you want to get some insight into why it did, his book is one worthy avenue.
Mark your calendars: Two for Tuesday.
-- A "ChinaBio Day" conference. An offshoot of the city's ChinaSF program, the all-day conference is designed, say its organizers, to facilitate "collaborations and partnerships among biotech decision-makers from the U.S. and China." The conference precedes the three-day BioPharm America 2009 gathering that opens Wednesday. Both take place at the San Francisco Marriott. Registration, speakers, agendas and other details at www.ebdgroup.com.
-- "Hopenhagen." A ad agency-led campaign to support a proposed climate-change treaty in Copenhagen is the topic at San Francisco's Commonwealth Club. Adam Werbach, CEO of Saatchi and Saatchi S, and Seth Farbman, managing director of Ogilvy & Mather, are among the speakers. Details at www.commonwealthclub.org.
Really? "Recession Takes Toll on Living Standards" - Headline in Friday's Wall Street Journal.
Tweeting at twitter.com/andrewsross. Blogging at sfgate.com/ columns/ bottomline. Tips, feedback: E-mail bottomline@sfgate.com.
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/12/BU3T19LPOU.DTL#ixzz0R2hIwIMx
Andrew S. Ross
Sunday, September 13, 2009
Even by its own standards, Chevron Corp.'s latest deal is big. And it has nothing to do with crude oil. The San Ramon company is about to officially sign off on a contract involving 40 trillion cubic feet of natural gas to be tapped in Australia and shipped in super-cool, liquid form to burgeoning energy markets in China and elsewhere
"On a capital basis, it will be our largest project ever," said a Chevron spokesman. He would not put a dollar amount on the investment in Australia's vast Gorgon field, but estimates put the total cost, shared with ExxonMobil and Royal Dutch Shell, Chevron's minority partners in the project, at $40 billion.
The payoff is likely to be enormous. Australian Prime Minister Kevin Rudd said the liquefied natural gas sales from the Gorgon field could total $249 billion over 20 years. Japan and South Korea have committed to buying $60 billion worth of the fuel from Chevron once the gas starts pumping in 2014.
A Chinese energy company already struck a $41 billion deal with ExxonMobil, which like Royal Dutch Shell has a 25 percent stake in the project. Expect more such agreements to be announced in the coming weeks.
The project ( www.gorgon.com.au) has passed muster with the environmentally conscious Australian government. Lloyd Avram, a Chevron spokesman, said the project "underwent a rigorous environmental assessment" that resulted in "stringent conditions." Among Chevron's initiatives are plans to build a giant carbon dioxide injection facility in the area, and special lighting technologies to protect flatback turtles on Barrow Island, a protected nature reserve, where the gas is to be processed.
"Gorgon is a key part of Chevron's future," said Avram. "The project feeds long-term demand for natural gas in the growing Asia-Pacific region. It also highlights the importance of Australia to Chevron's gas strategy, commercializing our equity gas resource base to grow a global gas business."
"It transforms Chevron's portfolio," was the way Robin West, CEO of PFC Energy Inc., a global energy consultancy, put it to the Financial Times.
Reading material: Looking for something to commemorate "Lehman weekend," the first anniversary of the Lehman Bros. collapse and the ensuing worldwide crash? Check out "A Colossal Failure of Common Sense," by Lawrence McDonald, a former Lehman VP who was present at the destruction. It's a real page-turner.
Apart from Lehman's own astounding follies, there are lots of local contributors to McDonald's bird's-eye view of the madness. They include the city of Stockton, pioneer of the "NINJA" mortgage ("no income, no job, no assets"), San Jose's Calpine Corp., a prime example of a "crazily overleveraged U.S. corporation" with its "now-you-see-it-now-you-don't-balance sheet," and former S.F. Supervisor Roberta Achtenberg, who as an assistant secretary at HUD pushed banks to provide what turned out to be disastrous mortgages to low-income and minority borrowers.
McDonald's biggest villains are former Lehman CEO Richard Fuld and his toady, the firm's president, Joe Gregory, both of whom give whole new meanings to the word hubris, not to mention "dumb and dumber," as they allowed, nay encouraged, Lehman to compile "almost three quarters of a trillion dollars of pure, unadulterated risk." That brought Lehman, plus Wall Street and much of the financial world, down, in his view.
"It never should have happened," McDonald concludes. If you want to get some insight into why it did, his book is one worthy avenue.
Mark your calendars: Two for Tuesday.
-- A "ChinaBio Day" conference. An offshoot of the city's ChinaSF program, the all-day conference is designed, say its organizers, to facilitate "collaborations and partnerships among biotech decision-makers from the U.S. and China." The conference precedes the three-day BioPharm America 2009 gathering that opens Wednesday. Both take place at the San Francisco Marriott. Registration, speakers, agendas and other details at www.ebdgroup.com.
-- "Hopenhagen." A ad agency-led campaign to support a proposed climate-change treaty in Copenhagen is the topic at San Francisco's Commonwealth Club. Adam Werbach, CEO of Saatchi and Saatchi S, and Seth Farbman, managing director of Ogilvy & Mather, are among the speakers. Details at www.commonwealthclub.org.
Really? "Recession Takes Toll on Living Standards" - Headline in Friday's Wall Street Journal.
Tweeting at twitter.com/andrewsross. Blogging at sfgate.com/ columns/ bottomline. Tips, feedback: E-mail bottomline@sfgate.com.
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/12/BU3T19LPOU.DTL#ixzz0R2hIwIMx
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