Gas Petrospective – September 10, 2010

Natural gas prices dropped 4.6 cents per million Btu yesterday, as traders sold futures in reaction to this week’s EIA underground storage figures. Dow Jones had conducted a survey of analysts and the average expectation was for a build of 58 bcf – which turned out to be right on the money. That was more than the five-year average, which was 54 bcf, and it represented the first time in a number of weeks that the surplus against the five-year average grew against the numbers we had a week ago.

This week’s EIA underground storage report showed a year-on-year deficit of 218 bcf (6.45%). A week ago, it was 208 bcf (6.29%) and three weeks ago, it was 185 bcf (5.79%). Seven weeks ago, it was 33 bcf (1.77%), so we have a trend of increasing the year-on-year deficit. Against the five-year level, this week’s report left us 166 bcf (5.54%) above, compared to 133 bcf (4.47%) a week ago and 196 bcf (6.96%) three weeks ago. Seven weeks ago, the surplus was 261 bcf (9.92%).

Market observers are now tracking Igor, which is a tropical depression – expected to be upgraded to hurricane status over the weekend or early next week. Most forecasters are expecting it to curl northwards in a sort of clockwise sweep into the Atlantic. At this stage, though, its projected path is not fully developed, nor is its final disposition determined yet.

There is still plenty of time left in tropical storm season … but it is increasingly unlikely that any storms will end up threatening gas output in the northern US Gulf. Of course, surprises do occur.

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