As of April 19th, the following fundamental(s) are bullish:

• Power Generation
  • NG demand for electric power generation increased 7% week-over-week
  • Structural shift has taken place in the power market, providing gas-fired generation a larger position in the power supply stack
  • Coal fired generation giving way to NG fueled generation, cleaner burning fuel

The following fundamentals are neutral:

• Canadian Imports
  • Imports to remain depressed due to decreased Canadian production
  • Drilling most likely to pick up when NG reaches $5.00/mmBtu level
• Weather
  • Mild spring-like weather early in the shoulder-month season
  • Little demand due to weather, no need for natural gas powered space heating or generation for air conditioning
• Industrial Demand
  • Less than 1% Y-o-Y increase

The following fundamentals are bearish:

• LNG Imports
  • Imports reached an all time high on Jan. 8 due to weather driven demand
  • Expected to rise 45%in 2010 due to new supplies from Russia, Yemen, Qatar, Indonesia, and Peru
  • LNG now makes up 10% of global NG supply, enables greater price competition
• NG Storage
  • As of April 15th storage report, supply levels at 1.756 trillion cubic feet, 16.3% above the 5 year average

• Technical Outlook
  • Prices broke out below the $5.00 resistance level in mid-February and have held there ever since, has been trading between $3.81 and $4.30 for the past 3 weeks
  • Speculators increased their net-short position for the week ending April 13, highest level of short positions in past decade
• US Production
  • Total US gas drilling rig counts have increased by 214 since the end of 2009, at 973 rigs as of last week
  • 15th consecutive weekly increase, 28% increase since end of 2009
  • Production from shale gas formations has been able to offset production losses from conventional wells
  • Last month EIA forecasted a 2.7% decrease in production, now they are forecasting a .7% increase due to the increased number of drilling rigs
  • NG production up 10.6% from 2007-2009, while consumption was down 1%

Additional Factors Affecting Prices:

• Chakib Khelil, Algeria’s energy minister and president of the Gas Exporting Countries Forum (which does not include USA or Australia, holds over 70% of world’s current proven NG reserves), had said it may emulate OPEC, which typically shuts the spigots to boost prices
• Announced on 4/19/10 that production cuts have been ruled out by risk of losing market share to countries like USA and Australia
• Production cuts were already denounced by 2 of the forum’s heavyweights, Qatar and Russia, who are both increasing market reach

In summary, there are more bearish factors than bullish.  The weak shoulder-season fundamentals should keep a cap on prices in the near term.

DISCLAIMER:  Past performance is not indicative of future results.  Electric prices are not 100% correlated to natural gas prices.  Geopolitical, economic, and weather related supply and demand spikes can significantly affect natural gas and electricity prices.