The Energy Information Administration (EIA) reported Thursday morning that 36 Bcf was injected into underground storage for the week ended Aug. 31. While the injection was smaller than most industry estimates and historical comparisons, natural gas futures bulls were having trouble gaining traction as the report pushed working gas levels in storage above the 3 Tcf level with two full months left in the traditional injection season.
The October contract reached a high of $5.980 in Thursday morning trade before falling lower in the afternoon. The prompt-month reached a low of $5.615 before settling at $5.650, down 15.5 cents from Wednesday.
“While the injection was constructive, it ultimately is meaningless, which is why futures are headed back down here,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “We tested resistance up at $6 and the level held.”
With market fundamentals looking rather limp, the broker noted that while the bears might not be in full control of the market, the important fact is that the bulls have been left without any leverage. “What are the bulls going to pin their case on?” Kennedy asked. “There is no shortage of natural gas and there is nothing threatening the Gulf of Mexico at this time. While September is supposed to be warmer than normal, I don’t think we are going to get any heat waves that measure up to a hill of beans. There is no reason for a sustained rally here so we are just going to range trade for a while between $6.050 on the topside and $5.250 on the downside.”
Some top traders are taking a more circumspect view of the inventory figure. Jim Ritterbusch of Ritterbusch and Associates said prior to the report that the market response to the data “will be much more important than the figure itself.” He added that an injection of less than 40 Bcf could sustain the week’s price strength for a brief period, but that he “would not be surprised by a counterintuitive price response capable of dropping values” quickly back to below Wednesday’s lows of $5.590.
While Thursday’s 15.5-cent drop was impressive, traders were unsure whether the $5.230 low from last week could be bested. Ritterbusch noted that if the market had seen an injection of 55 Bcf in this week’s report, then the table would have been set for the “possibility of new lows.”
Meteorologist John Dee is keeping an eye on an area of low pressure off the coast of Georgia and Florida that may develop further in the coming days. “This feature would still not be a threat to the Gulf, but could be a threat for the southeast U.S. coast by the weekend if development occurs,” he said in a note to clients.
The 36 Bcf storage build came in below most estimates and historical comparisons. Most estimates were for a build of 42 Bcf to 46 Bcf, but Bentek Energy LLC hit the nail on the head with a 36 Bcf injection forecast. According to the EIA, last year’s injection for the week registered 68 Bcf and the five-year average build stood at 67 Bcf.
As of Aug. 31, working gas in storage stood at 3,005 Bcf, according to EIA estimates. Stocks are 39 Bcf higher than last year at this time and 284 Bcf above the five-year average of 2,721 Bcf. The East region injected 39 Bcf and the Producing region chipped in 1 Bcf, while the West region, which endured significant heat last week, withdrew 4 Bcf.
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