By Duncan Sutherland – Exclusive to Gas Investing News

Market news

Ouch! Natural gas futures are hovering at six-month lows, in the mid-high US$7 range, on the NYMEX.

Down by almost half their values in July, futures contracts reflect a growing conventional wisdom that demand is not going to keep up with American production “rising at the fastest rate in almost half a century”. Analysts, however, are quick to point out that Mother Nature could bolster prices if she whips up a hurricane in the Gulf of Mexico. Keep your eyes on Gustav, which is moving on Haiti, and could steal a march on gas production in the Louisiana-Texas area of the Gulf.

It remains unlikely that natural gas will drop too much further, especially going into the strong demand of the winter months. For futures traders, note that NYMEX has changed margins for some contracts. As writing about it here would mean using up a lot of space here at South Parse, please click to get the full details here.

The National Post has arrived at an interesting bit of statistic from among the reams of gas price data. A story in this paper said that “the premium being paid for oil over natural gas in the US on an energy equivalent basis has not been this wide in 18 years”. The spread is higher than US$12, and offers a countervailing indicator that continuing high oil prices could exert upward pressure on natural gas, as swing-consumers such as electricity utilities switch more operations over.

Company news

Grey Wolf Inc (AMEX:GW) will be bought by Precision Drilling Trust (TSX:PD.UN) for $5 per share, in a bid valued around $2 billion. The lengthy process of buying Grey Wolf has been pursued for some months now, with bids and counter-bids being thrown about. Investors did not appear especially keen on the deal, with Precision shedding almost $2 (CDN) on the TSX after the announcement.

India’s state-owned Oil and Natural Gas Corp (ONGC) has rebuffed Statoil Hydro’s (NYSE:STO) attempt to purchase another 20 per cent interest in a significant block held in concert with ONGC (65 per cent) Petrobras (15 per cent) and Cairn India (10 per cent) (BOM:532792). Statoil still retains the option to double its current stake to 20 per cent.

Queensland Gas Co. (ASX:QGC) a coal-seam gas specialist, will acquire Sunshine Gas (ASX:SHG) for $830 million AUS. Queensland appears interested in the deal to ensure input gas for an LNG plant it is developing with BG Group (LSE:BG). Australia’s gas industry has seen a lot of activity lately, with international firms (especially state-owned Asian ones) expressing great interest in a stable, well-regulated and nearby source of energy. Part of the interest has undoubtedly been spillover from a long mining boom in the country, especially in coal.

International news

Prime Minister Stephen Harper mentioned today that Canada may reevaluate the terms under which Russia’s Gazprom is allowed to operate in Canada. The deal in question allows Gazprom to move LNG through the yet-to-be-built Rabaska LNG terminal, of which Gazprom would own a large portion.

Overall, Russia’s adventurism in the Caucasus has had mixed effects for the country. Though the action certainly weakened confidence in Caucasian energy transshipment, it has also stirred the somewhat complacent NATO states into action. Poland agreed to host a US missile-defence base on its territory, but only if the latter agreed to create a significant military base nearby. Russia was hostile to the missile-defence idea in the first place, so the planned redeployment of thousands of American troops to the area hardly seems like an improvement. Similarly, the conflict underlines the degree to which Russia is not an especially predictable country.