Coming in on the high side of many expectations but well below historical comparisons, the 53 Bcf injection into storage last week reported by the Energy Information Administration (EIA) Thursday morning prompted a wide range of near-month prices in the minutes following the report. However, bulls took control in the afternoon, pushing November natural gas futures higher to close at $7.132, up 32.5 cents on the day.
Trading at $6.870 just prior to the report’s 10:30 a.m. EDT release, the prompt month zig-zagged between $6.950 and $6.620 in the minutes that followed. The November contract took off in the afternoon to record a high of $7.180 before inching lower to close. Traders also had to deal with a short interruption in New York Mercantile Exchange futures trading on the Chicago Mercantile Exchange’s Globex electronic trading platform (see related story), although it was unclear what, if any impact, the disruption had on the market.
“Nobody really cares about these recent weekly storage report numbers because by the end of the month storage will be full. That is already a given,” said Ed Kennedy, a broker with Commercial Brokerage Corp. in Miami. “While the amount of gas in storage is more than last year, it is not enough supply to really make a difference in the grand scheme of things. The only thing that matters now is weather. How cold it is going to be and for how long?”
Kennedy also noted that the cash market is firm. “Just before the futures opening [Thursday], the cash market was running around $6.80,” he said. “We’ve got a bunch of cold fronts marching through right now and most of the forecasts for the winter — with the exception of the National Weather Service — are calling for a below normal winter. The only potential hiccup is that most forecast models are also in agreement on the idea that the first part of November is going to exhibit above normal temperatures for most of the country, so we have to keep our eye on that.”
Near-term temperatures could be a little chilly. The Weather Channel forecasts that the Midwest storm system should move east by Saturday, with more showers expected by the end of the weekend as another system approaches.”Temperatures will turn cooler into the weekend, as the cold front and storm system move east of the area,” the forecaster said. The high in New York City Thursday of 71 degrees will drop to 59 degrees by Monday. Chicago’s Thursday high of just 48 degrees is forecast to slip to 47 degrees by Monday, it said.
“Do I think futures are going to work higher? — the answer is yes,” Kennedy added. “However, I don’t think we are going to get past $7.40. Both cash and near-month futures prices will remain firm because the utilities are not going to pull gas from storage in October and November — even if it is cold — because they want reliability of supply for December, January and February. So they are going to handle the incremental demand for these two months by going to the cash market, which will keep the cash market [as well as November futures] firm.”
In the days leading up to Thursday’s storage report, most estimates were for an injection in the high 40s Bcf to low 50s Bcf. A Reuters survey of 23 industry players had been expecting an average injection of 48 Bcf, while the ICAP storage options auction on Wednesday indicated a 51.5 Bcf injection. The actual 53 Bcf injection fell well short of last year’s 73 Bcf injection and the five-year average injection of 65 Bcf. Despite the smallish injection, total working gas in storage is on pace to reach an all-time record level.
Including the 53 Bcf injection, working gas levels now stand at 3,442 Bcf, well above the weekly storage report record of 3,327 Bcf, which was recorded for the week ended Nov. 5, 2004. Records for the EIA’s weekly storage report go back to December 1993. Looking back at the EIA’s monthly records, which track further back, stocks are currently just shy of the 3,467 Bcf in storage at the end of October 1990 and the all-time record posted at the end of November 1990 of 3,472 Bcf. In its October 2006 Short-Term Energy Outlook, the EIA predicted that end-of-October levels will reach 3,538 Bcf.
As of Oct. 13, stocks were 391 Bcf higher than at the same time last year and 345 Bcf above the five-year average of 3,097 Bcf. Breaking down the report, the East region injected 30 Bcf, while the Producing region deposited 18 Bcf and the West region chipped in 5 Bcf.
©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |