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The October natural gas wholesale contract rose $0.059 yesterday or 1.5% on energy traders believing the very things we have been writing here in that, old man winter is around the corner and it’s time to start taking action on fixing the price on winter supplies. The financial markets seemed to have rebounded yesterday as well as the Dow Jones Averages were over 160 points higher on the day, however not due to old man winter. The EIA storage injection is the big topic of the day with Banque Paribas coming in at an 83 bcf storage injection and Reuter’s below expecting an injection of 85 bcf. Some energy traders think that any injection figure below 80 bcf and natural gas prices could stage a little rally today. So the theme for now is natural gas prices have fought the good fight and never made a new low below $3.80 on the wholesale contract and now are trading above the $4.00 price area. Seasonality in natural gas seems to be in natural gas’s favor at the moment and it becomes a self fulfilling prophecy if one looks back on historical charts and sees that prices tend to have an uplift prior to the winter.
In the lone start state this morning, the head of ERCOT, told a congressional panel that providers are being challenged in assessing how the rule will affect the risk of outages and whether they can reduce any losses in power. He said delaying the Environmental Protection Agency rule would give providers time to find ways to avoid outages Texas electricity providers may not have enough time to meet the January start date for an EPA rule that limits certain emissions that could threaten health across state lines, the head of the state's grid operator said Wednesday. His testimony came two days after Dallas-based Luminant Generation said it was cutting 500 jobs and shutting down some units at a coal-fired power plant because it couldn't meet the requirements. The company has sued the EPA, seeking to block the rule, which will require power plants in Texas and 26 other states to install technology to reduce sulfur-dioxide and nitrous-oxide emissions.
Everyone knows what we discuss on Thursday, so we’ll focus the rest of the commentary on the storage levels. U.S. natural gas inventories are expected to have climbed by 85 billion cubic feet last week, a Reuter’s poll of industry traders and analysts showed on Wednesday. There were 22 participants in the Reuters poll, with injection estimates ranging from 76 bcf to 100 bcf. Storage rose an adjusted 96 bcf for the same week last year. The five-year average build for that week is 79 bcf. Traders said estimating this week's build was complicated by the 13 bcf in supply cuts last week due to Tropical Storm Lee which were partly offset by the typical downturn in Labor Day holiday demand.
In last week's report, for the week ended Sept. 2, overall storage climbed 64 bcf to 3.025 trillion cubic feet, above the Reuters estimate of 61 bcf and the year-ago gain of 58 bcf but in line with the five-year average increase for that week of 64 bcf. The build trimmed the inventory shortfall relative to last year for the fourth straight week, cutting the total by 6 bcf to 131 bcf, or 4.2 percent. It left the gap to the five-year average unchanged at 60 bcf, or 1.9 percent. While the inventory shortfall compared with a year ago is still large, energy traders said it is down sharply from its June peak at 275 bcf, and most expect it to drop further as milder autumn temperatures spread. A build this morning at the Reuters estimate would widen the shortfall relative to last year by 11 bcf to 142 bcf, or 4.4 percent, but reduce the deficit to the five-year average by 6 bcf to 54 bcf, or 1.7 percent.
In the past four reports, total stocks rose 242 bcf, or 61 bcf per week, versus a 176 bcf adjusted build for the same one-month period last year and a 222-bcf five-year average gain for that period. Early injection estimates for next week's EIA report range from 85 bcf to 104 bcf versus a year-ago build of 78 bcf and a five-year average increase for that week of 72 bcf. If weekly stock builds through October match the five-year average pace, inventories will begin next heating season with 3.543 tcf, 7.7 percent below last November's record high of 3.84 tcf and 1.7 percent below average for that time of year. To get inventories above last year's high by Nov. 1, weekly injections would have to average 91 bcf for the remaining nine weeks of the stock building season, not a very likely scenario considering the five-year average for that period is 58 bcf.
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