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The November wholesale exchange contract was under pressure yesterday as sellers seemed to be convinced that colder weather will not arrive in time before they get to pressure this market lower. The November wholesale contract was lower by $0.068 on the day. Today is November expiration as well as the release of the EIA storage change number. The estimates for the storage change are the Banque Paribas survey calling for a build of 89 bcf, while PIRA and Bentek calling for a build of 92 bcf and Reuter’s is at 86 bcf which is lower than the other’s estimates. Last year at this time we saw a build of 74 bcf. Assuming we reach these levels, we will have over 3,700 bcf in total storage. The 6 to 10 day forecast calls for slightly below average temperatures in the South and average temperatures for this time of year for the rest of the nation.
Yesterday’s big announcement in our industry was that the BG group announced that it has signed a fully-termed sale and purchase agreement with Sabine Pass Liquefaction, LLC, a subsidiary of Cheniere Energy Partners, L.P., for the purchase of 3.5 million tonnes per annum (mtpa) of liquefied natural gas (LNG) over a 20-year period from the Sabine Pass LNG terminal located in Louisiana, USA. The agreement, which is subject to certain conditions and approvals, is the first long-term LNG purchase agreement from a project on the US Gulf Coast, allowing BG Group to secure LNG volumes for export from the US to international gas markets. LNG exports are expected to commence as early as 2015. Construction of the liquefaction facilities at Sabine Pass is expected to commence in 2012, with the initial phase to consist of two trains capable of producing up to 9 mtpa of LNG. BG Group is not an investor in the proposed liquefaction facilities.
As we do once a week, we’ll focus the rest of the commentary on the status of America’s fuel tank going into the winter heating season. U.S. natural gas inventories are expected to have climbed by 86 billion cubic feet last week, a Reuter’s poll of industry traders and analysts showed on Wednesday. There were 26 participants in the Reuters poll, with injection estimates ranging from 65 bcf to 111 bcf. Storage rose an adjusted 74 bcf for the same week last year. The five-year average build for that week is 47 bcf.
In last week's report, for the week ended Oct. 14, overall storage climbed 103 bcf to 3.624 trillion cubic feet, below the Reuters poll estimate of 110 bcf but well above the year-ago rise of 93 bcf and the five-year average gain for that week of 58 bcf. The build reduced the inventory shortfall relative to last year for the ninth time in 10 weeks, trimming the total by 10 bcf to 46 bcf, or 1.3 percent. The storage deficit to a year ago has narrowed sharply from its June peak at 275 bcf, and most traders expect the gap to shrink further in the next couple of weeks as mild weather opens the door to more above average builds. The injection last week also widened the surplus to the five-year average by 45 bcf to 113 bcf, or 3.2 percent. Four weeks ago stocks climbed above the five-year average for the first time since mid-April.
A build this morning at the Reuters estimate would trim the shortfall relative to last year by 12 bcf to 34 bcf, or 0.9 percent, and increase the surplus to the five-year average by 39 bcf to 152 bcf, or 4.3 percent. In the past four reports, total stocks rose 423 bcf, or 106 bcf per week, versus a 340 bcf adjusted build for the same one-month period last year and a 275-bcf five-year average gain for that period. Early injection estimates for next week's EIA report range from 48 bcf to 87 bcf versus a year-ago build of 67 bcf and a five-year average increase for that week of 35 bcf. Three triple-digit inventory builds over the last month have forced analysts to raise estimates of where inventories will peak this year. Most now expect storage to top out near 3.8 tcf, or just shy of last year's record high, before winter withdrawals begin.
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