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Gold/Mining/Energy : Big Dog's Boom Boom Room

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From: tom pope	6/20/2008 7:58:16 AM
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This is from Energy economist, and may be of interest. Not sure I understand the logic - if all possible switching has been done, wouldn't that relieve the pressure towards convergence? Our outlook remains unchanged. We expect more convergence of natural gas toward crude oil prices until storage levels are higher relative to the 5-year average. Four weeks ago the Btu spread between oil and gas prices had gas at 48.9% of crude. It is now 55.1%. All of the facilities that can switch from fuel oil to natural gas have done so long ago reducing the linkage between the two fuels. If oil prices decline this spread will narrow even faster. The 57 Bcf injection for the week of June 13 was 33 Bcf less than the normal injection of 90 Bcf. Storage levels are 52 Bcf less than the five-year average and are 401 Bcf less than last year. To reach last years storage level by the beginning of the heating season will require an average weekly injection of 80 Bcf. The Independence Hub is back on line in the Gulf of Mexico and producing in the range of 6-7 BCF per week.

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