Injection

As expected following Thursday’s modestly bearish storage injection report and the subsequent screen plunge, prices saw double-digit declines at all points Friday. The fact that outside the Rockies and Upper Plains cold weather forecasts only occasionally called for below-freezing lows, and the drop of industrial load that accompanies a weekend trading period, also contributed to cash market weakness.

Look for some some natural gas to be shut in for want of a place to go before the end of this storage injection season, but longer term all the signs for gas are bullish, according to Devon Energy President John Richels.

Look for some some natural gas to be shut in for want of a place to go before the end of this storage injection season, but longer term all the signs for gas are bullish, according to Devon Energy President John Richels.

Despite the current surplus of gas in storage and some predictions that working gas levels could end the injection season at maximum capacity near 3.7 Tcf, Chris McGill, managing director of policy analysis at the American Gas Association (AGA), warned gas buyers not to bet on it.

Despite the current surplus of gas in storage and some predictions that working gas levels could end the injection season at maximum capacity near 3.7 Tcf, Chris McGill, managing director of policy analysis at the American Gas Association (AGA), warned gas buyers not to bet on it.

Following last week’s bullish storage injection, energy analysts remained perplexed about this winter’s outlook for natural gas storage and its effect on winter prices. Raymond James analysts, running with the bulls, said the “big surprise” next winter will be a “resurgence” in industrial demand and a price return to 6:1 parity with oil. But energy analyst John Gerdes, still in a bearish mood Monday, noted that prices have hovered around $6-$7/MMBtu with no “noticeable” increase in industrial demand, and he remains convinced that gas prices will have to remain below $6 for at least a few months before there is significant upward movement.

Despite the current 53% gas storage surplus compared to the five-year average, gas storage levels could still end the injection season near a normal full level if spot gas prices decline to $5.00-5.50/MMBtu and displace coal during June and July and there is significant gas liquids stripping due to high liquids prices, according to a new analysis done by Citigroup analysts Gil Yang and Brian Chin.

Citing unplanned maintenance projects at various storage locations, ANR said Friday it would reduce injection capacity into those facilities by 575 MMcf/d from May 20 through June 30, leaving 925 MMcf/d available. Based on current nominations, ANR said it anticipated that the reduction will result in the curtailment of Firm Secondary and IT nominations.

As weather forecasts calling for cold began to pop up, natural gas futures on Friday were able to overlook the bearish 61 Bcf storage injection report from Thursday and explore higher price levels. The prompt month peaked at $11.840 before settling at $11.712, up 33.2 cents for the day and 29.7 cents higher than the previous Friday’s close.