Natural gas futures values got the green light to proceed lower Thursday morning after the Energy Information Administration (EIA) reported that a slightly larger-than-expected 40 Bcf was injected into underground storage caverns for the week ending Aug. 20. Near-month natural gas futures pierced support at $3.810, but failed to close below it.
In the minutes leading up to the 10:30 a.m. EDT report, September natural gas futures were trading at $3.865, but in the minutes that immediately followed, the contract plunged below $3.810 support to record a $3.791 low. The prompt month ended up finishing the regular session at $3.817, down 5.4 cents from Wednesday's close. October futures, which will take up front-month status after September goes off the board Friday, dropped a similar 5.3 cents to $3.843.
Heading into the report, industry surveys from Reuters and Dow Jones were expecting a 38 Bcf build. Citi Futures Perspective analyst Tim Evans, who was on the record with a 32 Bcf build estimate, noted that while the report came in "slightly higher than expected," it was still bullish when compared to historical figures for the week.
"The net injection was nearly in line with expectations but still supportive compared with the 59 Bcf five-year average build," Evans said. "This was the 10th consecutive week with net injections below the average, with the resulting downtrend in the storage surplus normally a bullish trend." The build was also well below last year's date-adjusted 54 Bcf build for the week.
As of Aug. 20, working gas in storage stood at 3,052 Bcf, according to EIA estimates. The deficit to last year's inventories increased to 198 Bcf, while the surplus over the five-year average decreased to 177 Bcf. For the week the East Region was all alone on the injection front with a 48 Bcf build, while the Producing and West regions withdrew 5 Bcf and 3 Bcf, respectively.
On the hurricane watch, meteorologists are juggling a handful of systems in the tropics. In addition to Hurricane Danielle and Tropical Storm Earl, which are both expected to take a more northern route sparing U.S. interests, meteorologists at AccuWeather.com are tracking two more systems that could vie for storm name Fiona. Alex Sosnowski, a senior meteorologist with the forecasting firm, said a tropical wave southeast of the Cape Verde Islands was looking fairly impressive Thursday and may soon be a depression.
"Of the three features in the central/eastern Atlantic (including Danielle and Earl), this one is the farthest south and if it develops, stands the best chance at affecting the Lesser and Greater Antilles and perhaps coastal areas of the U.S.," he said.
The tropical wave will be competing with a system of showers and thunderstorms in the Gulf of Mexico to become the sixth named Atlantic storm of the season. Sosnowski said while the system looked "less threatening" on Thursday, the region "will remain as an area to watch for generating a tropical depression or perhaps a weak tropical storm through the weekend."
Some traders Thursday were still dissecting Wednesday's nearly 17-cent decline. Peter Beutel, president of Cameron Hanover, believes near-term weather might have been more to blame for the plunge than tropical developments.
"Traders seemed more interested in the effects of 70-degree temperatures in the Northeast, where air conditioning use has plummeted," he said. "The Midwest has also enjoyed extremely moderate temperatures this week, and that makes the likelihood high that we will get a larger-than-recently seen build in underground storage figures in next week's EIA report. This market has not reacted very strongly to any of the inroads made in underground storage figures over the summer, but it is quick to react to threats that stocks will increase."
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