Following the disclosure Thursday that last week’s outsized storage withdrawal report was erroneous, industrial customers immediately called for a change to daily storage reporting and reforms to the natural gas trading rules on the New York Mercantile Exchange (Nymex), while the Energy Information Administration (EIA) defended its processing of storage information.

The announcement of a 49 Bcf withdrawal on the Wednesday before Thanksgiving Day vastly exceeded expectations and sent the December futures contract up more than $1 in the few hours left before it closed. In its latest report Thursday, EIA revised last week’s figure to 17 Bcf, saying a company or companies had submitted erroneous data and subsequently sent in a correction.

“We certainly don’t take anything that we do lightly,” EIA spokesman Jonathan Cogan told NGI. “We know that it has impacts. We’re well aware of that. We do have edit checks, and we are constantly emphasizing the importance of accurate data submissions to the respondents.

“This revision was due to a resubmission of data that we received,” he said. “Because of confidentiality of all of our survey data we can’t tell you more than [that].”

There were market rumors circulating that the erroneous data was submitted to EIA by ANR Pipeline, but ANR spokeswoman Kim Wallace denied that. She said ANR’s data was correct. Columbia Gas spokesman Karl Brack confirmed that Columbia, one of the largest gas storage operators in the nation, also submitted correct information to EIA for the week.

“We’re always trying to do better, but we have to rely on our respondents to accurately submit the data,” said Cogan. “We don’t blindly accept it. We do follow up on any anomalies that appear and we’re trying to improve in that area as well. The estimates that we had for that time period were within the normal range for this time of year. Obviously the market expectations were different than our number.”

A big part of the reason that natural gas futures responded so significantly was that the storage report was released on the last day of trading for the December futures contract — just hours before the contract closed. It was put out on the market during the most volatile trading day of the month. Since many monthly contracts for physical gas are indexed to the monthly Nymex closing, the last minute futures run-up directly affected the physical market for December.

The storage report was issued a day early — on Wednesday rather than on Thursday because of the Thanksgiving Holiday. However, EIA has the flexibility to change the day of the release if necessary and could have changed it to Tuesday rather than Wednesday.

“We do have the flexibility — on weeks when there are holidays that would affect our normal schedule — to determine on a case-by-case basis what day and time is chosen [for the storage data release],” Cogan noted. “We’ll certainly take into consideration what we learned as we go along.”

The Industrial Energy Consumers of America (IECA) issued a press statement coinciding with the release of the storage correction Thursday, calling on FERC to expedite the implementation of daily reporting of natural gas storage information in light of the extreme price run-up last week.

“The events of Wednesday, Nov. 24…illustrate the importance of accurate and timely market data when the price of natural gas increased $1.25/MMBtu or 17.4% in the 90 minutes following the release of the weekly inventory report” by EIA, wrote IECA Executive Director Paul N. Cicio in a letter to FERC Chairman Pat Wood and other Commission members.

The Nov. 24 run-up “significantly influenced” the price for December physical deliveries of approximately 73 Bcf/d of gas, which could cost gas consumers as much as $1 billion in higher gas prices, he said. Peter R. Huntsman, president and CEO of Huntsman Chemical, took the opportunity to again fault what he believes are lax trading rules on Nymex for gas, saying they cost consumer hundreds of millions of dollars last week because they failed to prevent the price spikes.

“According to financial news wires, the principal cause for the price run-up was ‘hedge fund managers and other large speculators’ trying to cover their trading positions. If the Nymex had meaningful trading limits in place, this like other devastating spikes in the past would not have occurred,” even in the midst of an erroneous storage report, he said.

The prices shot up in the Nov. 24, pre-Thanksgiving Day trading after the EIA reported that 49 Bcf was pulled from the storage for the week ended Nov. 19. The number fell far outside of anyone’s expectation in the market. Stephen Smith of Stephen Smith Energy Associates speculated correctly that either last week’s reported draw of 49 Bcf was wrong or the prior week’s 6 Bcf draw was wrong since the heating degree days for the two weeks differed by only 3% (see Daily GPI, Nov. 30).

“It is less important whether the inventory reported was accurate or not. What is important is that the entire multi-billion dollar natural gas market [was] in limbo for a full week” until EIA released its next gas storage report, Cicio noted. “This [resulted] in seven days of unnecessary uncertainty, volatility and significant market inefficiencies.”

If the EIA had been reporting storage figures daily, “there would have been gradual changes to the inventory, a clear market signal,” he said. “Instead, a…faulty inventory report resulted in a significant and volatile market reaction at the same time the December Nymex contract was closing. This is unnecessary and, in this case, costly to consumers.”

The Federal Energy Regulatory Commission is now weighing whether it should initiate a generic rulemaking to consider requiring interstate gas pipelines and other owners and operators of storage to post their previous day’s aggregate storage data. (see Daily GPI, Oct. 4). Pipelines and local distribution companies generally oppose the proposal, offering other solutions during a public conference that FERC held on the subject (see Daily GPI, Sept. 13).

The IECA contends there would be “significant benefits” to daily reporting of storage inventories, including reduced price volatility, increased marketplace transparency, improved data quality, market confidence, and reduced ability for “insiders” to gain unfair advantage through information that is not available to the general market.

“Benefits of daily reporting of natural gas inventories significantly outweigh any potential costs,” Cicio said, stressing the impact of transparent storage information on the market. “Next to changing weather conditions, there is nothing that impacts short-term price and volatility of the natural gas price more than the weekly storage report.”

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