Good morning:

Energy Markets continue quiet as we transition to summer which is coming on quickly.

Natural Gas continues depressed as the production greatly exceeds demand. This weeks EIA storage report shows a continued strong add to the national supplies, leading the trading funds to stay out of the market. Wells continue to shut in as the Baker Hughes Rig count shows 300 less producing wells than fall. Unless prices get closer to $4 per DTh, they will not come back on. What can change the trend? Summer heat in a short term influence. Natural Gas will be the preferred fuel this year again. See below for the electric expectations and influences. These will be the change the influences gas prices to the upside. In the meantime, it is as good a time as any for a long term price lock, as prices for next winter are only slightly above $3. Those who take mostly variable are probably in for smooth sailing till winter also. Hedges probably are wasted premium.

Electric prices continue soft as the weather has not yet turned to summer heat. Expect a tough, volatile summer for pricing. California is in drought, and they get a lot of supply from the Northwest Hydro plants which will not be in the mix for this summer. A number of coal plants went off line April 1, due to the implementation of the Mercury restrictions, and more will go off when the coal pile run off regulations take effect. The net result is that there is little to no fat in the system this year, so prices will be all over the map with the weather. It is our hedging recommendation at this time that we protect June, July and August, at least on peak, and probably around the clock.

Gasoline continues to rebound off the lows, as the summer driving heats up to vacation period. We expect wholesale prices to get back to the high $2.80 range in the next 4 weeks, which should make retail close to $3.25 for most of the country for summer.

Heating Oil and Propane are also down at historic lows, and should be hedged against next winter as soon as possible.