Natural Gas Storage Report

[dan_s]

Working gas in storage was 3,163 Bcf as of Friday, July 13, 2012, according to EIA estimates. This represents a net increase of 28 Bcf from the previous week. Stocks were 509 Bcf higher than last year at this time and 470 Bcf above the 5-year average of 2,693 Bcf.

A couple months ago, I thought the risk of another dip in NG prices in Sept/Oct was very high. I now believe that risk is all but gone. Natural gas storage will not fill before winter arrives. We will still reach the start of winter around 250 bcf above the 5-year average but that is a far cry from the TCF surplus we had just a few months ago. Next week's injection will also be well below average for this time of year, then injections may increase but not much. A lot of NG is now burned for power generation. If a hurricane moves into the Gulf of Mexico NG prices could be over $4.00 quickly. - Dan

Nat Gas injection bullish
By Dominick Chirihella - Thu 19 Jul 2012 08:10:40 CT
A bullish weekly inventory report has resulted in the Nat Gas market holding onto yesterday's gains but not much more than that after today's smaller than expected injection into inventory (see below for a more detailed discussion). The most interesting outcome from today's bullish injection report is the lackluster reaction by the market. Today's injection came in about 6 BCF below the market consensus and as of this writing the spot futures price has been hovering either side of unchanged since the release of the data. In fact the way the market is trading at the moment I would expect the longs to begin to get a bit uncomfortable with the market's inability to solidly penetrate and stay above the $3/mmbtu level.

The severe temperatures are now projected to cool down a bit along both coasts with the west coast projected to experience below normal temperatures for the remainder of the month of July. Demand for Nat Gas for power generation will start to decline and thus injections will start to increase. On the coal to Nat Gas switching front the macro economics continue to favor coal at current price levels for both Appalachian coal and Nymex Nat Gas. I expect utilities to move back in the direction of coal especially in locations where coal inventories are at very high levels. In fact EIA data through March, 2012 (latest available) shows inventories of coal about 18% above levels from a year earlier as well as above the five year average. With the economics of coal to Nat Gas switching very economically favorable for Nat Gas over the last several months I would expect that current coal inventories are still at levels (possibly even higher) than where they were in March.

Today's EIA report was bullish from the perspective that the injection was below the consensus level and bullish when compared to last year and the five year average injection level for the same week. The EIA injection was 6 BCF below the consensus (34 BCF) and below last year's injection and below the injection level for the five year average for the same week. The net injection of 28 BCF was below my model forecast (35 BCF) this week and at the low end of the range of market projections. The inventory surplus narrowed strongly versus both last year and the more normal five year average also. The current inventory level is now 470 BCF above the five year average.