Gas Petrospective – August 26, 2010

Natural gas prices dropped nearly 17 cents yesterday as traders gave recent storm formations huge nods of indifference. Daniele has become a hurricane. And the system of thunderstorms behind it has been named “Earl.” Neither seems likely to interrupt oil or gas production, gathering or pipeline facilities in the northern US Gulf.

Traders seemed more interested in the effects of 70-degree temperatures in the Northeast, where air-conditioning use has plummeted. The Midwest has also enjoyed extremely moderate temperatures this week, and that makes the likelihood high that we will get a larger-than-recently-seen build in underground storage figures in next week’s EIA report. This market has not reacted very strongly to any of the inroads made in underground storage figures over the summer, but it is quick to react to threats that stocks will increase.

In the process of reacting to what we have not seen yet (in terms of future stock builds), and by discounting storms that appear toothless but might not be, this market has demonstrated a clear desire to move lower. Prices had already discounted the end of summer. They now seem to be discounting a significantly delayed economic recovery. That may or may not be how things work out. But this market is keen to discount more bearish possibilities. The economic news hurt.

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