Gas Petrospective – July 30, 2010
Natural gas prices rallied more than a dime yesterday, stringing together the first four-day advance since early June. Each successive gain has been larger than the one preceding it, for a total four-day gain of 30.3 cents, or 6.62%. Yesterday’s gains came on forecasts for hot weather and in response to this week’s light injection into underground storage. A survey conducted by Dow Jones had given us an average expectation calling for a build of 34 bcf; in the event, storage increased by 28 bcf.
The latest storage figures leave inventories 94 bcf and 3.12% lower than a year ago, compared to a deficit of 52 bcf and 1.77% a week ago and a deficit of 23 bcf and 0.82% two weeks ago. Compared to the five-year average, storage now has a surplus of 239 bcf and 8.92%, compared to surpluses of 261 bcf (9.92%) and 287 bcf (10.67%) in the previous two weeks. The storage picture has been slowly getting more bullish and this has been a hot summer, so far. The National Weather Service (NWS) is predicting warmer-than-normal readings in “the eastern half of the country from August 5th to August 11th,” according to Dow Jones News (DJN).
It has been a genuine summer this year, and people living in the greater New York Metropolitan area and southern New England agree that it has been the hottest summer “in 20 years,” which is what we heard on the radio recently. It is significant that this week’s injection was the smallest this decade, outside of the peculiar year of 2006, during which we had a number of consecutive drawdowns. The smallest build, excluding 2006, was 42 bcf in 2005. Most of the other years had builds of 60-80 bcf. Hot weather on the horizon suggests that we have a good chance of eating further into the multi-year average surpluses.
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