The Energy Information Administration (EIA) reported Thursday morning that 64 Bcf was injected into underground storage for the week ended Sept. 7, a number that was well within widespread industry expectations. However, following the report, natural gas futures headed lower in a hurry, recording a low of $6.020 before settling at $6.029, down 40.9 cents from Wednesday’s close.
Some traders viewed Thursday’s action as somewhat corrective, following Wednesday’s 50.4-cent jump. After trading at $6.260 just prior to the 10:30 a.m. EDT report Thursday, October natural gas futures recorded a $6.150 tick just four minutes later and headed lower from there.
Citigroup analyst Tim Evans, who was predicting a 54 Bcf build, said he was a little surprised with the size of the injection. “The number was more than we had forecast, but still very much within the range of expectations,” he said. “The storage total is now exactly in line with a year ago, when prices were headed for a $4.050 low, so the downside may still be open here in the absence of hurricane threats.”
Wednesday’s run-up was attributed to the development of three separate storm systems, each with the potential of impacting Gulf of Mexico oil and gas infrastructure. Even as Hurricane Humberto — now a tropical depression — made landfall Thursday morning along the Texas coast, tropical weather continued to dominate the attention of traders. From the standpoint of the energy industry, Humberto did little more than close the Houston Ship Channel and cut power to homes and businesses, but in his Thursday morning weather blog, Joe Bastardi of AccuWeather hinted that Humberto may re-emerge into the Gulf. Bastardi keeps detailed records of storm tracks and landfall “hits” and said “if this comes back over the water, turns around and hits again somewhere, that is a separate hit, even though it may be the same storm, for it went back over the water and had to regenerate.”
Further out Tropical Depression 8 (TD8) continued its trek west. The storm was located 865 miles east of the Lesser Antilles and was moving to the west northwest at 10 mph. It had sustained winds of 35 mph and the National Hurricane Center (NHC) said it “would likely become a tropical storm [Thursday].” If NHC projections are correct, TD8 will hit south Florida. A third wave was located between TD8 and Florida. While some forecasters were looking for it to strengthen, no development had occurred by late Thursday afternoon.
Crude oil futures prices continued their rocket-like advance Thursday, setting a record for the third consecutive day and finishing above $80/bbl for the first time ever. October crude settled at $80.09/bbl, up 18 cents on the day.
Wednesday’s stunning 50.4 cent advance of the October natural gas futures to settle at $6.438 had some traders in disbelief — a disbelief that proved to be well placed. “The rise looks like a technical move to squeeze holders of shorts into covering. The fundamentals have not changed, and the market looks like a house of cards,” said a New York floor trader on Thursday morning.
Breaking down the storage report, most industry expectations were looking for a build in the low 60s Bcf. Golden CO-based Bentek Energy was expecting a 63 Bcf injection and a Reuters survey of 20 industry players produced a 62 Bcf build expectation. The 64 Bcf build came in well short of last year’s 103 Bcf injection and the five-year average build of 88 Bcf.
As of Sept. 7, working gas in storage stood at 3,069 Bcf, according to EIA estimates. Current stocks are at the same level as last year at this time and 260 Bcf above the five-year average of 2,809 Bcf. The East region injected 50 Bcf, while the Producing region chipped in 12 Bcf and the West region contributed 2 Bcf.
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