After working a little higher in early Thursday morning trade, the October natural gas futures contract returned to probe the downside after the Energy Information Administration (EIA) reported that 58 Bcf was injected for the week ending Sept. 3.
Heading into the 10:30 a.m. EDT report, the prompt-month contract was trading at $3.835, but dropped down to a low of $3.705 following the fresh inventory data. After a small rebound in the afternoon the contract closed out the regular session at $3.768, down 4.6 cents from Wednesday's close.
Citi Futures Perspective analyst Tim Evans said it appears that the bulls and bears are currently wrestling for power in the market. "The 58 Bcf build in storage for the week ended Sept. 3 was basically on expectations, so the price action really reflects more of a struggle for the control of the market than an expression of shock at the number," he said. "The build was moderately supportive relative to the 62 Bcf five-year average, with the year-on-five-year average storage [surplus] declining for the twelfth week in a row."
Evans had been expecting a 57 Bcf build. Ahead of the report most industry estimates appeared to be for a build in the mid 50s Bcf. A Reuters survey of 22 industry players produced a build range of 45 Bcf to 66 Bcf with an average injection expectation of 57 Bcf, while Bentek Energy's flow model projected a 56 Bcf injection.
In addition to coming in short of the 62 Bcf five-year average injection, the actual 58 Bcf build was also smaller than the date-adjusted 68 Bcf build recorded last year for the week.
As of Sept. 3, working gas in storage stood at 3,164 Bcf, according to EIA estimates. Stocks are now 218 Bcf less than last year at this time and 166 Bcf above the five-year average of 2,998 Bcf. For the week the East Region led the charge by injecting 35 Bcf, while the Producing and West regions added 18 Bcf and 5 Bcf, respectively.
Those who follow the ups and downs of the industry supply-demand outlook are keenly aware that "currently high shale-gas production is as big a factor as it is because base-load industrial consumption has been, and seems likely, to remain depressed," said Peter Beutel, president of Connecticut-based Cameron Hanover. "Nothing that has been released by any government agency this week (or for a number of months, for that matter) suggests that this base-load demand will increase significantly over the second half of 2010. That makes existing storage levels more bearish, and it makes prices in this market infinitely more susceptible to changes in temperatures or in the forecast courses of tropical storms."
While weather out of the tropics has mostly spared the Gulf of Mexico energy infrastructure this hurricane season, AccuWeather.com forecaster Joe Bastardi warned that three hurricanes may "prowl the Atlantic" later next week and that two of the three systems could impact the United States.
"We only had a 36-hour period without a tropical system over the past couple of weeks," Bastardi stated Thursday morning.
Bastardi is maintaining his prediction of 18-21 named systems in the Atlantic basin during the 2010 hurricane season. AccuWeather.com computer models show that not only Igor will be churning Atlantic waters, but also Julia and Karl joining in on a new "tropical frenzy" next week.
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