Bottom line: The latest inventory report from the EIA was neutral-to-bullish as the deficit to the five-year average rose slightly from 78 to 80 bcf.
Nevertheless, prices fell as technical traders sold following natural gas’ unsuccessful test of the upper end of its trading range near $4.40/mmbtu earlier this week.
Gas has fluctuated between $3.85 and $4.40 since March. At these prices, supply and demand look balanced, with no notable movements in the deficit against the five-year average. Unless that deficit expands or narrows significantly, expect prices to remain within their current trading range.
That said, one point we discussed last week that is worth mentioning again, is that over the past four weeks, total electricity generation has been running significantly below the year-ago level. That is unusual and may be related to vagaries in the weather. If and when power generation bounces back to levels equal to or greater than a year ago, demand could rise swiftly, and inventory builds could decline substantially.