Cash market prices overall fell 4 cents Thursday with the greatest weakness demonstrated by northeast and eastern points. To avoid unnecessary volatility, traders typically make their deals prior to the Energy Information Administration’s (EIA) release of inventory data, and in Thursday’s trading, cash and futures markets moved in opposite directions. In the West, Colorado industry groups reported that raging wildfires in the state were not impacting oil and gas.

The EIA reported an inventory build of 95 Bcf, almost exactly what the market was expecting, and at the close July had added 3.7 cents to $3.814 and August had gained 4.0 cents to $3.837. July crude oil gained 81 cents to $96.69/bbl.

Midwest utility buyers reported no gas sales for power generation in spite of seemingly supportive weather conditions. “It hasn’t been hot, but we have had high humidity,” said a Midwest buyer. “Some people are using their air conditioners to dry the air, but our power generation customers haven’t even started. I don’t know what’s going on with them. Maybe they are able to buy it on the grid, but they haven’t used any of their monthly allotment.

“We have been selling a little bit more than we do for June. Just a few 1,000 more dekatherms a day, but we have had cool weekends. There may be a hint of some furnaces still operating. Thursday I could see usage dropped a little bit so maybe some are finally switching off their furnaces.”

The buyer said his company’s baseload volumes were being used for seasonal demand and the rest was going into storage. “We are storing nuts for the winter, but I would love to be buying gas right now. We baseloaded for the month and don’t need to be buying [spot market] right now. Our first of the month price was $4.10, and it’s about $3.60 right now,” he said.

Temperature forecasts for the end of the week through the weekend showed mostly normal readings. Wunderground.com predicted that Thursday’s high in Chicago of 66 would hold Friday before rising to 79 by Monday, the normal high. Omaha, NE’s 81 high on Thursday was expected to rise to 84 on Friday before easing to 81 on Monday. The seasonal high in Omaha is 83. In Kansas City Thursday’s high of 85 was anticipated to reach 88 Friday and slide to 84 on Monday. The normal high in Kansas City is 83.

The National Weather Service in Chicago said, “The center of high pressure is expected to track across the upper Great Lakes [Friday] with a ridge axis extending south through the lower Ohio Valley. This will set up northerly to northeasterly winds at the surface. While ample sunshine is expected, allowing much of the area to warm up quickly with highs in the middle to upper 70s for much of the area…the onshore flow off of Lake Michigan will keep Lakefront locations much cooler with highs only in the lower 60s…and perhaps even only the upper 50s. Saturday morning will not be quite as cool as the high pressure shifts to the east and southeasterly to southerly winds return to the region.”

Next-day gas on Alliance fell 7 cents to $3.73, and deliveries at the Chicago Citygates shed 4 cents to $3.77. On Northern Natural Ventura, Friday packages came in at $3.65, 7 cents lower, and at Demarcation gas was quoted at $3.64, 8 cents lower. Gas into ANR ML7 changed hands at 3.70, down 5 cents.

In the East and Northeast declines were a little steeper. Gas at the Algonquin Citygates shed 22 cents to $3.87, and gas into Iroquois Waddington was seen 5 cents lower at $4.03. Deliveries on Tennessee Zone 6 200 L fell 11 cents to $3.86.

In the Mid-Atlantic, Friday deliveries on Dominion came in at $3.59, 2 cents lower, and gas at Tetco M-3 fell 7 cents to $3.73. Gas headed for New York City on Transco Zone 6 shed 12 cents to $3.74.

Warm temperatures seemed to be less on the minds of residents along the Eastern Seaboard than expected storminess. Kari Kiefer, Wunderground.com meteorologist said, “A strong storm will continue moving through the Ohio Valley and off the eastern seaboard via the Mid Atlantic on Thursday. This storm will carry a significant amount of moisture that will produce heavy rain and strong thunderstorms for a large swath of the East Coast from the Mid Atlantic into the Northeast. Additional heavy rain and thunderstorms will be likely in the Ohio Valley and Upper Midwest in the morning as the storm moves to the east.”

In Colorado, the Colorado Oil and Gas Association and the Colorado Oil and Gas Conservation Commission told NGI that oil and gas operations have been spared so far from the blazing Black Forest Fire, which has blackened thousands of acres in the state.

Futures traders saw an atypical market response to the EIA data. “The market just sat there after the [EIA] number came out,” said a New York floor trader. “We finally rallied about 7 cents, but with that number I thought we would get a little sell off, but it looks like there are too many shorts in the market. I think we are going a little lower, but maybe we can test $3.85 before we do.”

Last week, analysts were caught off guard by the Energy Information Administration’s (EIA) report of a 111 Bcf storage injection. Estimates for both the week ending May 31, and June 7 (Thursday’s) report centered around estimates in the mid-90 Bcf area, well above historical averages. In spite of the fact that not one analyst predicted the 111 Bcf injection, market observers were confident this week would be different.

“We don’t think we’ll see a true surprise (5 Bcf or more, higher or lower then the EIA Report), but like our spread, it will be close,” said John Sodergreen, editor of Energy Metro Desk (EMD). He pointed out that the EMD consensus is slightly lower (95) than the rest of the market surveys; the other surveys averaged 97 Bcf this week. “Most folks in the low 90’s this week see risk to the high side. We think the risk is to the low side of our consensus. At the end of the day, we think a few points on either side of 95 Bcf should not surprise,” he said.

A Reuters survey of 22 analysts showed a sample average of 96 Bcf with a range of 88-112 Bcf, and United ICAP was forecasting a build of 96 Bcf as well. Bentek Energy, utilizing its flow model, predicted a 94 Bcf injection. In any event both the year-on-year and five-year deficits shrank. Last year, 66 Bcf was injected, and the five-year average is for an 84 Bcf increase.

Analysts at Societe Generale in New York see an oversold market. “U.S. natural gas front-month prices appear oversold given the likelihood of warm weather through June across much of the Lower 48,” the firm said in a report Wednesday. Things change, however, as the injection season progresses.

“Higher prices expected through July should keep injections much above last year’s level and lead to another and steeper price correction in August and September, down to $3.50/MMBtu,” the firm said. “Lower prices should boost [power generation] demand and limit inventory refills to 3.7 Tcf. This level is bullish for winter maturities since end-of-March inventories would end up below 1.5 Tcf in this case, assuming a normal winter. Winter prompt prices above $5/MMBtu are not out of the question.”

Spot futures Wednesday traded down to a three-month low at $3.71, and Addison Armstrong at Tradition Energy noted that they “rebounded amidst light short-covering, but forecasts for mild temperatures across the Midwest and Northeast and a sizable storage injection should provide resistance to significant rallies in the coming days. Weather forecasts are little-changed from [Wednesday], with normal to below-normal temperatures expected across the Northeast and Midwest in the coming weeks, while the Southeast and Texas is expected to see above-normal temperatures.”

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