The July natural gas wholesale exchange contract dropped for the first time in three days on speculation that rising production will overwhelm demand for the power-plant fuel. The July wholesale contract declined 0.8 percent on an Energy Department report yesterday that showed U.S. natural gas production rose 3.3 percent in March to a record as onshore output climbed. Production advanced to 77.83 billion cubic feet a day from a revised 75.33 billion in February, the department said in a monthly report known as EIA-914. Output of 2.41 trillion cubic feet in March was the highest for any month in department data going back to 1980. Production in the lower 48 states advanced 3.8 percent to 68 billion cubic feet a day from a revised 65.51 billion, rising for the first time in three months. Production in Texas increased 6.1 percent to 21.4 billion cubic feet a day from a revised 20.17 billion, according to the report.
On the efficiency front this morning, the occupation of meter readers has gone the way of the milkman or the gas station attendant. Customers of utilities have noticed they never see a meter reader anymore as utilities have been switching customers entirely to "smart meters" that not only record usage, but also log the time the power is used. That technology is even more novel as data is sent through the power lines, with electrons carrying the information back to the company. For utility customers, it means no more meter readers in the basement or outside the home. For customers with old-style meters, it means no more estimated bills. An actual read of the meter is taken every other month for those customers. While the actual reading the following month will even out the bills, customers subject to estimated billing prefer to be billed for their actual use in the month it is incurred. For example in PPL, the business case was centered on timely and accurate automated reading, said PPL spokesman Michael Wood. During 2003 and 2004, the utility changed the meters for all its 1.4 million customers. The meters take advantage of a little-used characteristic of power lines, the ability to transmit data. The meters send usage data over the power lines regularly, even logging hour-by-hour power use. If there's storm trouble, or a service disruption, a customer service employee can "ping" a meter to see if a customer, or group of customers, has power as well.
As we do on every Thursday, we’ll focus the rest of the commentary on the storage levels. U.S. natural gas inventories are expected to have risen 95 billion cubic feet last week, a Reuter’s poll of industry traders and analysts showed on Wednesday. There were 21 participants in the Reuters poll, with injection estimates ranging from 85 bcf to 110 bcf. Storage rose an adjusted 90 bcf for the same week last year, while the five-year average build for that week is 99 bcf.
In last week's report, for the week ended May 20, overall storage rose 105 bcf to 2.024 trillion cubic feet, above Reuters poll estimates for a 94 bcf build, the year-ago gain of 100 bcf and the five-year average build of 95 bcf. The build narrowed the inventory shortfall relative to last year by 5 bcf to 230 bcf, or 10 percent, and left stocks 26 bcf, or 1 percent, below the five-year average. In the past four reports, total stocks rose 339 bcf, or 85 bcf per week, versus a 354 bcf adjusted build for the same one-month period last year and also a 354-bcf five-year average gain for that period. Early injection estimates for next week's EIA report range from 78 bcf to 95 bcf versus a year-ago build of 98 bcf and a five-year average gain for that week of 96 bcf.
Storage hit an all-time high of 3.84 tcf in early November, but ended March with about 1.585 tcf in the ground after a cold winter. Stocks started the April-through-October injection season at about 1 percent below the five-year average. If weekly stock builds through October match the five-year average pace, inventories will begin next heating season with about 3.577 tcf in the ground, about 7 percent below last November's record high but near average. The EIA expects storage injections this stock-building season to total 2.29 tcf, the largest seasonal build since 2003. That would drive domestic inventories to an all-time high near 3.87 tcf by next winter.