Natural gas bears weren’t spooked by the release of government inventory data showing additions to supplies that were slightly less than anticipated.
The 10:35 a.m. EDT release of Energy Information Administration storage data showed a healthy injection of 65 Bcf, though it was somewhat lower than the 70 Bcf expected by the market. Immediately after the release of the figures prices staged a brief rally but soon started to grind lower. At the close September futures settled at $9.119, down 12.9 cents, and the October contract lost 11.5 cents to close at $9.224. September crude oil fell $2.69 to $124.08/bbl.
Bears didn’t quite get the price collapse of the prior two trading sessions when inventory data was released. On the previous two releases, July 17 and July 24, spot futures collapsed 87.3 cents and 46.5 cents, respectively, as additions of 104 Bcf and 84 Bcf were well ahead of both year-earlier levels and the five-year average.
Supplies currently stand at 2,461 Bcf, and to reach a “comfortable” 3,400 Bcf by the traditional Nov. 1 start of the heating season slightly less than 63 Bcf needs to be injected weekly for the remainder of the season. Bulls like to point out that there is still plenty of summer left, and the most active portion of the Atlantic hurricane season is yet to come.
“If we can’t rally in the face of that [bullish supply data], then I guess people are continuing to think we will have a well supplied market, and there are no storms to think of,” said a Washington, DC-based broker. He noted also that recent strength in natural gas had been predicated on buoyant crude oil prices, but after posting a strong advance on lean gasoline inventory numbers released Wednesday, crude “is giving a good hunk of that back.”
$9 may prove a pivotal near-term price for natural gas. “I think $9 support for natural gas is vulnerable. We’ve gotten under there briefly on a continuation chart, and it seems that we are setting up to test it again,” the broker said.
The recent price decline from as high as $13.694 early in July has spawned buying interest. “We have done more end-user business in the sell-off and have had buyers go out to 2011, 2012 and 2013. There seems to be a lot of consumers out there who don’t think the price decline is going to last.”
He added that the ones who are suffering are the ones who didn’t hedge. “You need a good solid close below $9 to get the market down to another level, but I doubt the producers will hedge. They are eternal optimists,” the broker said.
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