Thursday, August 26, 2010

EIA: Storage +40 Bcf to 3.052 Tcf

The weekly EIA working gas in storage report showed a 40 Bcf net injection, bringing the total gas in storage to 3.052 Tcf.   The weekly injection again was lower than the same week last year (+53 Bcf) and the five year average (+59 Bcf).  Storage levels actually decreased by a small amount in the Producing and West Regions, while increasing by 48 Bcf in the East Region.

The storage level continues to improve when compared against last year (198 Bcf, or 6.1% lower) and the five year average (177 Bcf, or 6.2% higher).

Temperatures across most of the country again remained high last week when compared against normal readings, as shown below.

Just like the bitterly cold winter, the hot weather this summer has helped keep gas prices from going through the floor.  But as this toasty summer draws to a close, gas prices are on a downward slide.  The Henry Hub spot price closed down again today at $3.85/MMBtu.  While this is 42% better than last year's price this week, it is a 26% decrease from the recent high two months ago.  The plummeting prices are bringing back chilling memories from the first week of September last year when the spot price dropped below $2/MMBtu. I'm no prognosticator, but I think it is worth reaching for the safety belt for the next few months.  I fear it will be a wild ride.  Without an improved economy, gas prices will again be dependent on extreme temperatures, which is a fundamentally bad position.  Oh yeah, meteorologists are predicting a warm winter this year.

The only upside is that utilities provide gas the ultimate floor.  As gas prices drop, utilities start using more gas instead of coal.  Now that the price of natural gas is under $4/MMBtu, the fuel switch is starting to happen.

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