Natural gas futures received a temporary boost on Thursday morning after the Energy Information Administration (EIA) reported that only 27 Bcf was injected into underground stores for the week ending Aug. 13. The bullish momentum was unsustainable as the September contract later made a new low for the move before closing at $4.171, down 6.8 cents from Wednesday's finish.
After trading as low as $4.205 in pre-report trading Thursday morning, the September contract spiked to a high of $4.375 immediately following the release of the 10:30 a.m. EDT report. However, the bump proved to be short-lived as the prompt-month contract reached a new low of $4.141 before inching higher to close.
"It looked like we were going to get upward momentum right after the number was released, but the excitement proved to be temporary," said a Washington, DC-based broker. "I have to tell you the charts do not look well. The run-up on the number brought us right up near resistance at $4.385, but we fell from there to record a new low for the move at $4.141. In total, this is not good for the bulls, but great for the bears."
She said the next stop is support at $4, with $3.900 to follow. "I do have to say from what we're seeing is that a lot of people have either already locked in or are floating with the market. I think the producers, who have not already hedged, are also floating with the market and praying for a hurricane.
"From the bullish standpoint, the only new news is that some of the meteorologists are saying that the jetstream patterns are changing, which could allow for better formation of these disturbances as they come off the Cape Verde Islands," she told NGI. "There is some thought that we could see activity in the tropics increase over the next week or so. In the old news category, the current storage surplus to the five-year average continues to come down, but the economy -- as tenuous as it is -- is trumping everything. We also find ourselves here on Aug. 19 with one of the warmest summers in a long time. Despite that fact, we failed to break above $5 for any period of time and now we sit at $4. I think that is really very telling."
Citi Futures Perspective analyst Tim Evans, who had been expecting a 40 Bcf addition, deemed the report "bullish" and noted that the surplus to the five-year average continues to come down with each week that passes.
"The build of 27 Bcf was bullish relative to consensus expectations and was even further below our own 40 Bcf projection," said Evans. "More importantly in seasonally adjusted economic terms, the build was well below the 50 Bcf five-year average."
Despite the below-normal injections the last few weeks, traders aren't impressed. "If you look at any kind of chart you see this market is rangebound and has a hard time getting above $4.34," said a New York floor trader. "The consensus is that the market is under pressure, and you can see that reflected from how the curve is flattening."
Heading into Thursday morning's storage report for the week ending Aug. 13, Tradition Energy analyst Gene McGillian was eyeing a 30 Bcf build, while a Reuters survey of 31 industry players produced a 23 Bcf to 41 Bcf injection range with an average build expectation of 31 Bcf. Bentek Energy's flow model was projecting a 32 Bcf injection.
In addition to being much smaller than the five-year average, the actual 27 Bcf build also paled in comparison to last year's date-adjusted 54 Bcf build for the week.
As of Aug. 13, working gas in storage stood at 3,012 Bcf, according to EIA estimates. Stocks are 185 Bcf less than last year at this time, but 196 Bcf above the five-year average of 2,816 Bcf. For the week the East Region injected 40 Bcf while the West Region added 3 Bcf. The Producing Region withdrew 16 Bcf.
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