Next-day gas prices rose in Thursday's trading, but most of the exchanges took place before the typically market-moving Energy Information Administration (EIA) weekly inventory report.
With the exception of some modest market strength in the Rockies and California along with outsize pipeline constraint-driven surges in New England, most points were within a few pennies of unchanged.
The NGI National Spot Gas Average advanced 9 cents to $2.31, but without just two New England locations, which advanced over $2, the national average dropped to 4 cents. EIA reported a storage build of 81 Bcf for the week ended Oct. 16, well below expectations closer to 88 Bcf, and after an initial advance, prices rolled over to finish lower on the day. At the close, November was down 1.8 cents to $2.386 and December was off 2.0 cents to $2.583. December crude oil rose 18 cents to $45.38/bbl.
Traders looking for a market advance following the release of the thin 81 Bcf build got burned. "A lot of guys got long on the number and watched it go right against them," a New York Floor trader told NGI. "There was no push [higher] beyond the number, no oomph. I bailed and lost just a touch, but I should have made a lot of money.
"The number was 81 Bcf, and they were expecting 88 low side and 90 high side. That tells me that it was a padded number, or there is going to be a revision. I'm playing this market from the short side from now on," he said.
Others see the miss as mistiming of the data. "I think last week [100 Bcf] was high by 8 Bcf, and there was some correction this week," said John Sodergreen, publisher of Energy Metro Desk.
"If you look at the GWDDs and if you compare last week and this week's DDs and put them all in a row, you would see that they all balance out, but last week's 100 Bcf should have been around 92 Bcf and this week around 89 Bcf. I think there was probably some late reporting, and EIA is not obligated to report any changes less than 7 Bcf."
Once the number hit trading screens, November futures rose to a high of $2.435, and by 10:45 a.m. November was trading at $2.395, down 0.9 cent from Wednesday's settlement.
Prior to the release of the data, analysts were looking for an increase in the upper 80 Bcf area. Bentek Energy was at the low end of estimates with 82 Bcf, utilizing its flow model, and Genscape was figuring on an 87 Bcf build. A Reuters poll of 26 traders and analysts showed an average 88 Bcf with a range of 82-95 Bcf.
Bentek attributed its 82 Bcf estimate to increased power burn. "Power burn demand was the largest mover on the week, increasing to average 26.3 Bcf/d during the week, up more than 1.5 Bcf/d week over week," it said. "The robust power burn demand was driven by low natural gas prices combined with mild temperatures."
"The initial reaction was higher since we were looking for an 87 Bcf to 88 Bcf build," a New York floor trader said. "We basically went back to where we were before the number came out. There was really nothing crazy off the number."
Tim Evans of Citi Futures Perspective said, "The 81 Bcf build in storage was at the bottom of the range of market expectations, bullish for prices. The smaller net injection -- with no adjustments such as reclassification behind it -- implies a tighter background supply-demand balance that should carry over into the weeks ahead."
Inventories now stand at 3,814 Bcf and are 434 Bcf greater than last year and 163 Bcf more than the five-year average. In the East Region 49 Bcf was injected, and the West Region saw inventories increase by 3 Bcf. Stocks in the Producing Region rose by 29 Bcf.
The marquee level of 4 Tcf is in sight. Current inventories stand at 3,814 Bcf, and with two weeks remaining in the traditional injection season, 93 Bcf needs to be injected weekly to make the mythical mark. Can't quite make 93 Bcf? Add a few mild weeks at the beginning of November and it's a piece of cake.
In the physical market next-day gas prices posted solid gains with New England points leading the way higher. Gas at the Algonquin Citygate jumped $1.98 to $4.80, and deliveries to Iroquois, Waddington added 24 cents to $3.02, and gas on Tenn Zone 6 200L soared $2.22 to $5.03.
Gas on Texas Eastern M-3, Delivery added 8 cents to $1.83, and packages on Transco Zone 6 NY gained 21 cents to $2.38.
Flows westward on REX Zone 3 are beginning to build. "Flow levels on the easternmost portion of REX Zone 3 were generally up on Oct. 22nd while the two larger points at the western end in Illinois declined significantly," said NGI markets analyst Nate Harrison. "At Lebanon, OH, REX deliveries rose 31% to 269,495 Mcf, and at Moultrie and Edgar, IL, deliveries declined 6% and 9%, respectively.
"The most significant development [Thursday] was a capacity expansion at REX's interconnect with Panhandle Eastern at Putnam, IN. The pipeline increased delivery capacity 80% from 165,000 Mcf/d to 297,000 Mcf/d. This increase is the third such instance since Tallgrass began the REX East-to-West reversal project on Aug. 1st of this year."
Daily gas buyers will be on their toes as short-term weather is definitely giving hints of winter cold to come. "[A] cold front will move across the northeastern U.S. [Thursday], with showers possible along and ahead of the front. The front will move offshore tonight, generally bringing an end to the precipitation, although a mix of rain and snow showers may linger into Friday morning across portions of northern New England," the National Weather Service said in a Thursday morning report.
"Farther west, scattered showers and thunderstorms will be possible from the Four Corners region into the central Rockies. Temperatures will be cold enough in the higher elevations of the Colorado Rockies for precipitation to fall in the form of snow, where 2 to 8 inches is possible."