Surpassing most expectations yet again, the weekly storage injection figure announced yesterday by the American Gas Association sent natural gas futures spiraling lower late in the session yesterday, pressing the expiring contract to fresh 13-month lows. With that selling pressure, July went off the board at $3.182, down 21.5 cents for the session and 62.8 cents below where it was when it began its tenure as prompt month on May 29.

According to the American Gas Association, 108 Bcf was added to underground storage facilities during the week ending June 22, bringing working gas levels to 52% full at 1,717 Bcf. The report was immediately deemed bearish as it fell in the upper end of the wide range (85-120 Bcf) of market expectations. Comparatively, last year at this time the market was only able to refill 73 Bcf into the ground and the five-year average is an build of 87 Bcf. Since the injection season began, storage stocks have grown by 1,090 Bcf versus 536 Bcf a year ago.

While much has been said about the seemingly plentiful supply and its effect on prices, not nearly as much has been said about demand. While admitting that supply is certainly up, a risk manager pointed to demand decay, “that has not returned as a result of lower prices,” as a reason for the robust storage numbers and weak prices. Specifically, he believes that bearish American Petroleum Institute data and falling crude and fuel oil prices has inhibited the market’s migration back to natural gas. August crude oil prices finished down $1.37 at $25.61 and July heating oil closed down 0.0325 cents at $0.6994.

To compound the effect of relatively low price of alternative fuels, is the historically high rate of nuclear utilization and the relatively mild temperatures the market is enjoying right now. “Nukes are running better than ever and the there is no sustained heat in the forecast. You couldn’t have scripted a better scenario for lower prices,” he continued.

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