There’s a long summer ahead, but up to this point natural gas storage injections are going very well indeed, according to two independent analysts who now are projecting that, weather permitting, storage fill could reach the optimum levels of 2.8 to 3 Tcf by the start of winter.

Based on the Energy Information Administration’s June 5 announcement of an all-time record-breaking fill for the previous week of 114 Bcf, heavy injections in the previous four weeks and a 113% gain since the injection season began in mid-April over the five-year average, Kyle Cooper with Citigroup in Houston, estimates the market could wind up Nov. 1 with 3,020 Bcf in storage. That depends on injections staying well above the five-year average through the hurricane and air conditioning season.

Thomas Driscoll of Lehman Brothers in New York, also calculated weather-normalized injection rates averaging 13.3 Bcf/d over the last four weeks to be 2.8 Bcf/d stronger than the five-year average of 11.2 Bcf/d. More severe weather increased this year’s demand by 0.7 Bcf/d and decreased injections by the same amount compared to the five-year averages. With normal weather, Driscoll estimates injections would have been 14 Bcf/d, roughly 2.8 Bcf/d stronger than five-year averages. Given normal weather, storage stocks will reach roughly the 2,890 Bcf mark by Oct. 31, he predicted.

Driscoll said the market may have to lose an additional 0.7-2.0 Bcf/d of demand in order to reach the more desirable target of 3-3.2 Tcf before winter.

For Cooper “it certainly appears that the market is functioning quite well with $6+ gas, adding supply and subtracting demand as needed.”

“Clearly it remains a long summer and many events may still occur. However, barring extreme temperatures or hurricane-related supply disruptions, storage injections should continue at rather robust levels for the next few weeks.”

When the real heat arrives, generators will fire up with oil first “and large injections will occur for much longer than market expectations,” Cooper declared in his daily futures research report. Into July and August storage injections will fall off as all gas-fired generating units will be needed for the peak summer demand.

Cooper believes speculators banking on continued high prices could be undermined by a continued heavy storage fill. “This market is trading on fear, hysteria and speculation. Mother Nature may very well save the speculators in the near-term, but these price levels with these injections are not sustainable. It will require extremely hot weather along with supply disruptions to maintain these price levels.”

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