Gas Petrospective – September 13, 2010

Natural gas prices were up 11.5 cents per million Btu on Friday, as traders bought back short holdings and got long in front of Hurricane Igor, as it has now been upgraded. In many respects, it also looks like traders may be done discounting the arrival of the shoulder months, now that they have actually arrived.

While nothing is projected yet to cause precautionary closures or to progress on to the northern US gulf areas of production, gathering and distribution, we have plenty to keep an eye on as we start this new week. We have Igor, which has become a well-defined hurricane with an uncertain path. Following behind Igor, we have what is now just Tropical Depression #12, but which could become “Julia,” “Karl,” “Lisa,” or “Matthew.” There is a disturbance in the Caribbean which could take one of those names, as well. And the West African coast has become a virtual conveyor belt of tropical activity over the last three weeks, so we could potentially see all of those names used by this time next week.

Traders may finally be acknowledging the improvement in comparative storage levels over the summer. Last 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%).

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