Gas Petrospective – August 6, 2010

Natural gas prices dropped 13.9 cents per million Btu yesterday, in yet another sign that this market can be thoroughly schizophrenic. Analysts were polled by Dow Jones, and the average estimate for this week’s EIA underground storage change came in at a build of 34 bcf. This week’s EIA build was 29 bcf. Theoretically, that should have been supportive. It was not, though.

If one were to compare this week’s build against last year’s build (66-67 bcf, depending upon whether one uses the same date or the corresponding Friday) and then against the five-year average build (43.4 to 47 bcf), then this week’s build would have to be seen as wildly supportive. But it wasn’t.

The year-on-year deficit is now 132 bcf (4.29%), Last week, it was 94 bcf (3.12%) and the week before it was 33 bcf (1.77%). The surplus against the five-year average is now 221 bcf (8.10%). Last week, it was 239 bcf (8.92%) and two weeks ago it was 261 bcf (9.92%). Based on those figures, it was a bullish report, and yet traders were selling.

In any event, despite what we see as only potentially bullish comparisons, some traders were reportedly disappointed by this week’s EIA report. We don’t really even see how.

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