Natural gas futures broke to new seven-week lows this morning as traders reacted quickly to the latest gas storage data from the Energy Information Administration (EIA) showing that stocks increased by a whopping 105 Bcf last week. After plumbing to a $3.12 low at about 11:30 a.m. EDT, the July contract rebounded slightly amid light short-covering by locals. Estimated volume was high with 117,081 contracts changing hands.

According to the EIA, storage now stands 1,893 Bcf, which is 436 Bcf more than at the same time last year and 330 Bcf above the five-year average. The 105 Bcf injection exceeded not only the 85-90 Bcf range of expectations, but also the 103 Bcf refill seen this time last year. Although it is only 2 Bcf, the increase in the year-on-year surplus from 434 Bcf to 436 Bcf is important because it follows a string of year-on-year surplus declines dating back five weeks.

Along with its weekly update yesterday, the EIA also revised its storage estimates for the period from March 15 to May 24. Although the EIA revised data in each of the 11 weeks, the cumulative effect of all the revisions was only an 8 Bcf decrease in the amount of gas in the Producing Region and Total Lower 48 figure. To put this another way, storage is now perceived to be 97 Bcf higher than last week at this time (105 Bcf injection this week minus 8 Bcf downward revision).

“It’s not unusual when you start a new survey to have some growing pains that need to be ironed out,” said EIA’s William Trapmann. “In this case, we had a couple of respondents that resubmitted their information upon having the reporting requirements clarified to them.” He added that while the changes span over an 11-week period, the changes in absolute terms are minimal.

However, the largest of yesterday’s revisions — an 8 Bcf decrease — drew some attention, not necessarily because of its size, but rather because it looked suspiciously like a correction of a correction. The EIA issued a correction on March 16 revising upward by 8 Bcf the amount of gas estimated in the Consuming Region East for the week ending May 3. As part of yesterday’s more expansive correction, the EIA revised downward by 8 Bcf the amount of gas estimated in the Producing Region for that same week. However, Trapmann was quick to note that the 8 Bcf increase in the Consuming Region and 8 Bcf decrease in the Producing Region in the same week was only a coincidence and not a correction of a correction nor was it attributable to a reassignment of gas from one region to the other. “It’s just a coincidence that the volumes match up,” he said.

The National Oceanic and Atmospheric Administration released an updated El Nino report yesterday suggesting that the U.S. will experience a moderate El Nino condition for the remainder of 2002. Historically, El Nino events for the U.S., like the one experienced in 1997-98, are consistent with decreased Atlantic tropical storm activity and a cooler and wetter winter for the East. NOAA will continue to monitor the development of this El Nino event as it matures and will issue monthly updates on its website at http://noaa.gov. Additionally, look for NOAA to update its Atlantic Hurricane Outlook in early August. Currently NOAA looks for an average to above-average hurricane season marked by 6 to 8 named storms (see Daily GPI, May 21).

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