Quite a few market observers were perplexed by the sudden sharp increase in natural gas futures prices Thursday after the EIA reported another relatively large weekly storage injection of 78 Bcf. The 16-cent increase in futures was even more surprising in light of the apparent discrepancy between EIA’s weekly estimated storage numbers and the actual storage numbers from EIA’s monthly data for earlier this year.

The weekly data fell short of the monthly data by 26 Bcf at the end of February, 29 Bcf at the end of March and by 85 Bcf at the end of April. Observers now wonder whether those differences increased over the summer and whether the market should be looking for a substantial revision to weekly storage levels, which show 2,266 Bcf of working gas in storage as of Aug. 15, or about 182 Bcf less than the five-year average.

“If, and that’s a big ‘if,’ any revision to the weekly numbers does occur, that revision is likely to be an increase in inventory levels rather than a decrease,” said CitiGroup analyst Kyle Cooper.

But EIA’s Bill Trapmann, who manages the weekly storage survey, said there’s no reason to be alarmed; no revisions are expected and the discrepancy probably worked itself out over the summer.

“Conceptually [the monthly and weekly numbers] should line up, but in practice, given that one is a sample survey involving some estimation, it isn’t guaranteed that you would get the same number as you do for the monthly,” he said.

Trapmann said it also isn’t correct to assume that the current weekly storage estimate is lower than actual storage levels. “I don’t think so. We’ve done some analysis to date to look at this, and the seasonal differences that we think affected our estimation process are probably transitory.” He said the differences between the old American Gas Association weekly series and the EIA’s month data often peaked around March and April and then diminished.

“Someone asked me if they should simply add 85 Bcf (the difference at the end of April) to the current weekly total,” said Trapmann. “I don’t think that would be appropriate. There is a very good chance that the difference has worked its way through.”

However, he noted that the estimated standard error in the latest weekly report is 52 Bcf.

Trapmann also noted that some of the April weekly numbers also probably should have been 11 Bcf/week higher due to a reclassification of base gas to working gas that occurred sometime during that month but that was reported to EIA by storage operators much later and then incorporated into the weekly survey in June.

There also may be some methodological reasons for the discrepancies that may need to be worked out, he said. “We feel that while the weekly storage methodology probably performs well and has performed well in more normal circumstances, this past winter was rather unusual with the tremendous draw downs. The methodology is predicated on the working assumption that [storage] firms will tend on average to perform similarly with respect to their uses of storage.

“We’ve cross checked the individual submissions between the two surveys and they are consistent for the information we received, so we believe the issue is within the methodology [for the weekly survey]. We are looking into [whether changes are needed]. Before we would introduce any significant change to the system, it would certainly be announced in advance to allow people to prepare themselves for it.

“We’re looking at trying to get a methodology that would be able to capture some of the changes in the industry as they happen, while at the same time we wouldn’t want to require frequent updates that would lead to frequent revisions. I’m sure we all hope that the events of the past winter don’t repeat themselves with these massive drawdowns, but if they do we will have to be prepared.”

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