It appeared that market watchers were engaged in a round of “buy the rumor, sell the fact” following Thursday’s news from the Energy Information Administration (EIA) that 164 Bcf was withdrawn from natural gas storage for the week ending Dec. 10. Immediately following the report, front-month futures values plummeted toward $4.
Heading into the 10:30 a.m. EST report, the January contract was trading at $4.179, already down nearly a nickel from Wednesday’s close. Immediately following the fresh storage data, the prompt-month contract sank to $4.063, before trailing even lower as the afternoon wore on. After recording a low on the day of $4.020, January futures closed at $4.048, down 17.4 cents from Wednesday’s close.
The report gave traders an idea of just how great an impact last week’s cold and snow, which ripped across the Great Lakes, Ohio Valley and Mid-Atlantic, had on heating requirements. In the days leading up to the report, most industry estimates were for a storage pull of between 150 Bcf and 163 Bcf. Bentek Energy was expecting storage levels to get 158 Bcf lighter, while a Reuters survey of 26 industry players was honed in on a 163 Bcf drop.
Citi Futures Perspective analyst Tim Evans, who had been calling for a 150 Bcf pull, said the withdrawal was right on target with most industry expectations, but he noted that the market appeared to be in “buy the rumor, sell the news” mode.
“The 164 Bcf net withdrawal was inline with market expectations and above the 153 Bcf five-year average for the period, although apparently it would have taken something closer to the 187 Bcf drop from a year ago in order to head off the apparent ‘sell-the-news’ trade plan of the major players,” Evans said. “Overall, we continue to view the weather and storage trends as supportive for at least the balance of the month, with January just a question mark.”
As of Dec. 10, working gas in storage stood at 3,561 Bcf, according to EIA estimates. Thanks to last year’s mammoth 187 Bcf withdrawal, current stocks are now only 35 Bcf less than last year at this time. However, the draw reduced the current surplus to the five-year average from 332 Bcf to 321 Bcf.
For the week, the East Region removed 111 Bcf while the Producing and West regions contracted by 42 Bcf and 11 Bcf, respectively.
The economy continues to crawl along in first gear. The Thursday morning release of both housing starts and weekly jobless claims were as expected. The Commerce Department reported that November housing starts came in at 555,000 units at an annual rate, up slightly from expectations of 550,000 and an improvement over October’s 519,000 tally. The Labor Department said jobless claims were 420,000 for the week ended Dec. 11, exactly what the market was expecting.
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