Despite having its plate full with fresh natural gas storage data and the upgrading of Adrian to a Category One Hurricane in the Pacific, June natural gas had a mostly uneventful trading day Thursday.
Coming in a tad above industry expectations, the Energy Information Administration (EIA) reported Thursday morning that 90 Bcf was injected into underground natural gas storage during the week ended May 13. Immediately following the 10:30 a.m. EDT report, June natural gas futures found support at $6.36 and then rebounded to $6.42. However, just after noon, the prompt month turned down again to reach a $6.31 low for the day, before settling at $6.357, down 3.5 cents from Wednesday.
Responding to the storage report with a yawn, Commercial Brokerage Corp.’s Ed Kennedy said the 90 Bcf build was neutral. “It is what you would expect at this time of year,” he said.
The broker added that he believes the natural gas futures market is still consolidating. “We could potentially be at a bottom, but it is way premature for that assumption,” he said. “It needs a lot more work even if it is. I don’t think you’ve got follow-through in either direction.”
As for the chance that June natural gas could fall much more, Kennedy said he doesn’t think it is in the cards. “We still have scaled-down buying all of the way through January, which would make it kind of tough to get down” much further, he said.
A Washington, DC-based broker said trading on the day didn’t reveal much. “It sort of looked like a nice even distribution with a push up in the morning, a drop in the afternoon and a settle that was a couple cents off of Wednesday’s close.”
He added that because it was anticipated, the 90 Bcf build didn’t seem to create any “larger movement” within the market. “While natural gas futures are weak, prices still appears to be within a pretty solid support zone, which is going to take some time to grind through,” he said. “Until summer weather shows up, I think anywhere from our current level to $6.14 is likely going to be where we are going to live for a while.”
He said that the end of the downtrend is probably not too far off unless crude breaks down through $45/bbl. “Unless we see that, I don’t think you have to worry about gas below $6,” he said.
The 90 Bcf build was slightly above the 85 Bcf industry consensus and just above the ICAP-Nymex storage options auction’s 88 Bcf projection. However, the actual injection was slightly bearish when compared to last year’s injection of 84 Bcf as well as the five-year average increase of 75 Bcf.
Working gas in storage now stands at 1,599 Bcf, according to EIA estimates. Stocks are 223 Bcf higher than last year at this time and 291 Bcf above the five-year average of 1,308 Bcf.
Also on the radar is the progression of now Hurricane Adrian in the Pacific. The National Weather Service’s National Hurricane Center (NHC) said late Thursday afternoon that Adrian was headed towards Central America with 85 mph winds, traveling northeast at 9 mph. As of 5 p.m. EDT Thursday, the storm was approximately 90 miles southwest of San Salvador, El Salvador.
A hurricane warning remains in effect for the Pacific Coast of Guatemala from Sipicate eastward along the El Salvador coast to the El Salvador-Honduras border. On its current northeastward course, Adrian is expected to reach the coast late Thursday night.
Prior to the storm’s hurricane classification, Kennedy said the storm likely didn’t pose a threat to U.S. production areas. “It’s not going to be ‘big bad Adrian’ when it crosses the isthmus,” Kennedy noted. “Those mountains down there in El Salvador and Guatemala are pretty high, so that will rip the heart right out of it. It could reform in the Gulf or the Caribbean, but that is going to take a while. We are not making a big deal out of it down here in Miami. Yeah, we may get some rain out of it, but we need it.”
Kennedy added that none of the independents are making a big deal out of it either. “We will see what happens over the weekend, but as of right now, I don’t think it is anything to worry about,” he said. “The one thing that has me a little concerned is that the water temperatures and the tropical conversions on the Atlantic are much above normal.”
Despite the fact that Adrian has serious obstacles ahead of it including power-sapping mountain ranges, the Washington, DC-based broker warned, “I am firmly in the camp of don’t tell Mother Nature what she can’t do.”
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