By Allan Robinson
Exxon Mobil Corp.'s (XOM) agreement to buy XTO Energy Inc. (XTO) for $31 billion (U.S.) is a bet that natural gas usage in the long-run will rise as a cleaner energy alternative to coal and heavy oil.
Natural gas is also receiving a boost with a draw down in natural gas storage. The price increased 3.7%, up 19 cents to $5.35 per million British thermal units.
“With winter blanketing much of the northeast, UBS Securities Canada expects a large 140-150 billion cubic feet per day withdrawal next week,” compared with the recent 64 bcf. withdrawal, said Andrew Potter, an energy analyst for UBS in a report to clients today.
“Gas withdrawal was larger than expected, but there’s still a long way to go,” he said. “Continued cold weather and further supply declines will be necessary to erode the current 573 bcf surplus over the five-year average,” he said.
The strength in capital markets was also in evidence this morning with Citigroup Inc.’s deal with the U.S. regulators under which it plans to repay $20 billion in Troubled Asset Relief Program.