Smaller NatGas Injection Fails To Boost Prices

Natural gas inventories rose by 89 bcf last week, at the lower end of estimates.

Natural gas was last trading down by less than 1 percent to $2.83/mmbtu after the Energy Information Administration reported that operators injected 89 billion cubic feet into storage last week, at the lower end of analyst estimates that ranged from 89 to 93 bcf.

The latest injection was below last year’s build of 113 bcf and above the five-year average build of 84 bcf.

In turn, inventories now stand at 2,433 bcf, which is 714 bcf above the year-ago level and 41 bcf above the five-year average (calculated using a slightly different methodology than the EIA).

The weather last week was much warmer than seasonal norms.

According to the Edison Electric Institute, utilities generated 83,868 GWh in the week ending June 13, up 7.2 percent from a year ago.

Looking forward, the NOAA’s 6- to 10-day outlook calls for mixed temperatures across much of the country.

NOAA 6- TO 10-DAY OUTLOOK

Meanwhile, Baker Hughes reported that the number of rigs drilling for natural gas in the U.S. fell by one to 221 last week.

Natural Gas Rig Count

Natural Gas

Bottom Line: The latest inventory data from the EIA were neutral, as the inventory surplus against the five-year average increased from 36 to 41 bcf and the inventory surplus against a year-ago decreased from 738 to 714 bcf.

Despite coming in at the lower end of analyst estimates, natural gas didn't react much to today's inventory build. That could be because forward weather forecasts are calling for moderating temperatures, particularly in the important South and Northeast regions.

Without the aid of persistently hotter-than-normal temperatures, it will be a struggle for natural gas prices. Indeed, last week's weather was 40 percent warmer than normal (62 cooling degree days versus the typical 44 cooling degree days), yet the injection still came in above the five-year average.

That's not surprising, of course. After all, just two weeks ago, the EIA reported the largest weekly injection of the decade, clear evidence there is an abundance of supply out there.

If the latest weather forecasts hold, look for natural gas to make a push to the lower end of the trading range near $2.50/mmbtu.