Thursday, February 4, 2010

Gas in Storage: Losing Traction

The weekly EIA working gas in storage figure showed a 115 Bcf drop to 2.406 Tcf.  This withdrawal is lower than the weekly withdrawal last year (-194 Bcf) and the five year average for this week (-178 Bcf).  As a result, the gas in storage figure is 9% higher than last year's level and 6.6% higher than the five year average.  A couple of weeks ago, these numbers had evened out, but warm and seasonal weather over much of the U.S. for the previous two weeks created slack in the use of gas for heating.  Now the red line has changed trajectory and is in danger of poking back out of the top of the five year band.

The weekly drawdown in the East and Western Regions averaged around 6% of the gas supply, but the Producing Region only withdrew 1.4% of supply.  The bulk of the excess supply compared to the five year average is in the West Region (19.3% over five year average) and Producing Region (+10.6%), while supplies in the East Region are only 1.2% above the five year average.  The temperature map below tells the story.

With the bitterly cold weather across much of the country this week, the storage figure should show a decrease next week, but until then we will have to endure more stories about the oversupply of natural gas.


Anonymous said...

Because of the cold temperatures, there will be a big consumption of natural gas during the first three weeks of February. Furthermore the Commerce Department said on Jan. 29 that the economy expanded 5.7 percent in the fourth quarter. The Institute for Supply Management said Feb. 1 that its U.S. factory index rose in January, signaling the economy is growing.
These two factors make hope that stocks will reach 1500 billion cubic feet end of March 2010, below the 1654 Bcf of last year and equal of the five-year average.

And meteorologists plan low temperatures in March…
I think that we are going to have surprises with natural gas stocks.

Robert Hutchinson said...

I think the most important aspect of what you said is economic growth. While heating leads to higher withdrawals, the market needs to believe that there is sustained gas consumption on the horizon.

Watching the storage/weather game over the past few months has been mindboggling. Ultimately, changes in prices have to do more with how much the weekly change in storage differs from traders' expectations rather than real fundamentals. It's a parlor game and we're just along for the ride.