While coming well within most of the industry’s estimates, the 84 Bcf natural gas storage injection for the week ended Aug. 20 announced Thursday was hugely bearish when compared to historical data. As a result, September futures, which expire Friday, dropped significantly from pre-storage release levels.
Brought lower by the Energy Information Administration’s (EIA) storage report, the prompt month declined from the pre-release trade level of $5.25 to notch a low of $5.105 in early afternoon trading. The contract closed at $5.189, down 10.9 cents from Wednesday. October futures dropped 9.8 cents to settle at $5.334.
The 84 Bcf build left in the dust last year’s 53 Bcf injection and the five-year average build of 55 Bcf. Stocks are currently 262 Bcf higher than last year at this time and 165 Bcf above the five-year average of 2,449 Bcf.
“It looks like they are filling it up hell-bent for election,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “There never was any problem about refilling storage, but that is just being proved out now. Whatever amount they want to put in and call full, they obviously can do it, whether that’s 3.1, 3.2 or 3.3 Tcf.
Working gas in storage now stands at 2,614 Bcf, according to EIA estimates. In the East region, stocks are 56 Bcf above the five-year average, while stocks in the Producing and West regions are 97 Bcf and 12 Bcf above their five-year averages, respectively.
“There [was] a lot of strip [buying] in the winter months after this big slide, so [natural gas futures] may go sideways for a little while, but that is about the only positive thing I can say right now,” Kennedy said. “I think the path of least resistance over the long term will be down, barring a hurricane getting into the Gulf of Mexico.”
Despite the rosy storage picture, Kennedy said a close eye should be kept on the latest weather system out in the Atlantic. “AccuWeather is saying there is a chance that it could be a major hurricane, but the question remains where will it go,” he said.
The National Hurricane Center reported at 5 p.m. (EDT) that Frances had reached hurricane Category 1 status, becoming the fourth hurricane of the 2004 Atlantic season. The storm was approximately 1,005 miles east of the Lesser Antilles, moving on a west-northwest course at 16 mph with wind speeds nearing 80 mph. However, it was too early to tell whether Frances would head into the Gulf or stay in the Atlantic.
The NHC reported that some strengthening is expected, noting that the storm could reach hurricane Category 2 status sometime on Friday.
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