Physical gas prices continued to slide Thursday at nearly all points, likely helped lower by the screen’s milestone Wednesday of dropping below $2. Moderating weather in the Northeast Thursday pulled the plug on any price gains prior to the release of inventory data, and western locations weakened as well.

The Energy Information Administration reported an 8 Bcf build in working gas inventories, which at first seemed sharply lower than expected, and May futures jumped after the figure was released. It didn’t take traders long to figure out that the report wasn’t all that bullish when they read the fine print and noted that an additional 10 Bcf was reclassified as base gas, thus upping the build in effect to 18 Bcf.

At the close of futures trading May had eased one-tenth of a cent to $1.983 and June had slipped 1.3 cents to $2.092. May crude oil rose 94 cents to $103.64/bbl.

Short-term traders saw the adjusted number as slightly bullish. “We were hearing a number from 18 to 25 Bcf, so with the adjustment it was a little on the low side,” said a New York floor trader. “Hypothetically, when it traded $2.06 we said we were going to sell it, and before you knew it the market was 2 cents lower. You’ve got to sell these rallies.”

In spite of being somewhat supportive, the overall supply-demand universe isn’t changed all that much with the report. “The 8 Bcf net injection was less than expected, although adding back the 10 Bcf in ‘reclassifications’ would have brought the figure up to 18 Bcf, closer to the expected level,” said Tim Evans, an analyst with Citi Futures Perspective. “Still, this was a supportive number compared to both expectations and the 22 Bcf five-year average. It’s not enough of a bullish surprise to alter the bearish landscape and we still see a very tight storage capacity problem for the months ahead, but there could be a relief rally off the report nonetheless.”

Longer term analysts were looking for a larger build. Ritterbusch and Associates was looking for a gain of 23 Bcf, and industry consultant Bentek Energy calculated an 18 Bcf injection. A poll by Energy Metro Desk revealed an average 22 Bcf from a sample of 30 traders and analysts.

By the end of October there may not be enough storage capacity to accommodate a typical refill season. Evans said if the current 888 Bcf surplus is added to current stocks of 2,487 Bcf and production continues at current rates, total gas could reach about 4,500 Bcf. The trouble is the EIA lists nameplate storage capacity at about 4,100 Bcf.

Industry consultant Bentek Energy cites only minimal additions to capacity. In a report it noted additions of 48 Bcf this summer in the Producing Region and no additions in the East or West. “A total of nine projects, mostly expansions of existing salt cavern facilities in Mississippi, Texas and Louisiana, will be online by the end of the year, with a total 63.6 Bcf of capacity.”

Analysts at Goldman Sachs see what looks to be an oversupplied market relying on “unprecedented coal-to-gas switching” to rebalance (see related story). They also recommend buying longer dated natural gas contracts.

“As we expect the turbulence this summer to stem from logistical constraints in the oversupplied environment, we believe spot prices will be far more impacted than longer-dated prices,” said Goldman analyst David Greely. “While we are lowering our average price forecast for 2013 to $4.00/MMBtu from $4.25/MMBtu, due mainly to lower expected coal prices, the decline in forward natural gas prices suggests that it is an opportune time to begin to take long positions in natural gas in 2013 and beyond, and we open a long summer 2013 Nymex natural gas trade recommendation (current price: $3.36/MMBtu).”

In the physical market, prices at northeastern points romped lower as the weather outlook recalled high temperatures reminiscent of March. “We are in a shoulder season and prices firmed for today [Thursday] and weakened for Friday. You really do depend on how hot or cool it is, as well as power prices,” said a Northeast marketer.

He added that this market was “nothing to write home about. I guess we’ll just wait for $1.50.”

IntercontinentalExchange reported that power for Friday delivery into Nepool fell $5.43 to $26.00/MWh.

Forecaster predicted the high in Boston Friday would reach 61 and 66 on Saturday. The normal high in Boston at this time of year is 55.

At some points quotes dropped close to a half dollar. Algonquin Citygate shed almost 45 cents and deliveries to Tennessee Zone 6 200 L fell by more than 40 cents. Parcels into Iroquois Waddington fell close to a quarter.

California traders saw the day’s declines less as load driven and more a follow up to the weak Nymex finish Wednesday, which sent May futures to new 10-year lows and a settlement below $2 at $1.984.

“I think it [PG&E Citygate] is just following the market. Most of the trading is done by the time the storage number comes out,” said a northern California trader.

Friday deliveries to PG&E Citygate slumped a couple of pennies but gas into Malin fell over a nickel. Quotes at the Opal Plant tailgate were off by 7 cents and gas on CIG fell 2 cents.

Declines in the Midcontinent were more modest. ANR SW and NGPL Mid Continent Pool dropped a few cents each.

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