NGI Archives | NGI All News Access
Futures Test $4 Support Following Anemic 24 Bcf Storage Draw
A surprise 16 Bcf natural gas storage injection from the Producing region for the week ended Feb. 13 was putting significant downward pressure Thursday morning on psychological futures support at the $4 level. Shrugging off an almost $5/bbl gain in crude futures, March natural gas futures ended up closing out the day’s regular session at $4.078, down 13.6 cents from Wednesday’s close.
The Energy Information Administration’s (EIA) Thursday morning report revealed that the nation as a whole withdrew a measly 24 Bcf last week. Just prior to the 10:30 a.m. EST report, the March contract was trading at $4.167. Minutes later, it was trading at $4.001.
Strength in the near-month crude futures contract couldn’t even prop up natural gas values. March crude jumped $4.86 on Thursday to finish the regular session at $39.48/bbl. It was the highest close for the front-month contract since Feb. 9.
“The 24 Bcf in net withdrawals was much lower than expected and miles beneath the 155 Bcf five-year average for the period,” said Tim Evans, an analyst with Citi Futures Perspective in New York. “This implies that either the demand associated with last week’s mild temperatures had cut heating demand more than had been calculated, or that there was some increase in supply. We think it was mostly likely the former, but it’s bearish nonetheless.”
Hencorp Becstone Futures LC broker Ed Kennedy said the small withdrawal really showed just how much demand has left the market for the time being. “Industrial demand is way off and we know chemical demand is down significantly,” he said. “The weather also warmed up. I think all of that was reflected in the storage number. However, the long-range forecasts say we are supposed to go back below normal, but nowhere near as cold as it was in January. It is supposed to stay that way through March.”
Kennedy said any adventure of futures below $4 would likely be short-lived. “They may put a three in front of this price, but it is not going to stay there for very long for one simple reason. We are going to have to put gas in storage for next winter and these are great numbers to hedge,” he said. “We are at $4.370 on the injection strip and the average cost of the gas currently in storage is about $10. You better believe it makes sense to hedge around $4.300, so we have that buying underneath the market for the injection months. That’s not bullish by any standard, it just means we expect support.”
The 24 Bcf draw came in well under industry expectations and historical comparisons. Ahead of the report, a Reuters survey of 22 industry players produced a range of withdrawal expectations from 40 Bcf to 87 Bcf with an average pull expectation of 57 Bcf. The actual draw was also much smaller than last year’s 157 Bcf pull for the week.
According to the EIA, working gas in storage stood at 1,996 Bcf as of Feb. 13. Current stocks are now 177 Bcf higher than last year at this time and 155 Bcf above the five-year average of 1,841 Bcf. The Producing region’s 16 Bcf injection significantly reduced the impact of a 25 Bcf pull from the East region and a 15 Bcf pull from the West region.
Â©Copyright 2009Intelligence 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.
© 2023 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |