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The December wholesale exchange contract was lower by $0.032 yesterday as energy traders are still looking at the 6-10 weather projections and wondering where is the colder than normal weather given we are still in a over-supplied natural gas market. Some of the weather models are calling for colder than normal temperatures starting mid-month, but that’s a good two weeks from now and folks aren’t interested in far away projections, but what is the weather looking like right now in the major population centers of the United States. This is contributing to the storage situation which, if estimates are correct, will break the record before the end of November. Estimates for today’s EIA storage projection are Bentek calling for a build of 77 bcf and PIRA calling for a build of 72 bcf while Reuter’s below is at a lower injection figure of 69 bcf. Last year at this time we saw a build of 67 bcf. This morning’s number will bring us close to a total storage number of 3,800 bcf. Banque Paribas stated yesterday that they believe the reality must be finally here since more and more articles about Cheniere Energy closing its deal with BG Group to export LNG out of Sabine Pass to the UK are being written in the press. A year ago, the idea of becoming an energy exporting nation seemed like a fantasy for wishful thinkers. Today it looks like there is no question that we are headed that way.
When a storm deprives people of heat, electricity and phones, home owners in these storm areas chant the same question, why can't utilities avoid these weather-related blackouts by burying their cables underground? That sounds right, but utilities say burying distribution lines is impractical and cost-prohibitive for communities built before 1973, when state law like In New Jersey required it for developments exceeding two homes. Old overhead circuits would have to be replaced and streets excavated to insert new conduits. Utilities would also be required to make costly changes to each customer's service from the pole to their premises. Underground cables aren't immune to breakdown, either, especially since they're linked to more vulnerable overhead lines. Also buried lines take far longer to fix and can be easily damaged by excavation and sometimes are not properly marked on maps either. For example in Texas, these same questions were being asked after our 2008 Hurricane since some folks in and around Houston were without power for almost 2 weeks.
We all know what today is so we’ll focus the rest of the commentary on the storage levels in the U.S. Natural gas inventories are expected to have climbed by 69 billion cubic feet last week, a Reuter’s poll of industry traders and analysts showed on Wednesday There were 25 participants in the Reuters poll, with injection estimates ranging from 47 bcf to 80 bcf. Storage rose an adjusted 67 bcf for the same week last year. The five-year average build for that week is 35 bcf.
In last week's report, for the week ended Oct. 21, overall storage climbed 92 bcf to 3.716 trillion cubic feet, above the Reuters poll estimate of 86 bcf and well above the year-ago rise of 74 bcf and the five-year average gain for that week of 47 bcf. The build reduced the inventory shortfall relative to last year for the tenth time in 11 weeks, trimming the total by 18 bcf to 28 bcf, or 0.7 percent. The storage deficit to year ago has narrowed sharply from its June peak of 275 bcf after seven straight above average weekly builds. The injection last week also sharply widened the surplus to the five-year average by 45 bcf to 158 bcf, or 4.4 percent. Five 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 slightly trim the shortfall relative to last year by 2 bcf to 26 bcf, or 0.7 percent, and widen the surplus to the five-year average by 34 bcf to 192 bcf, or 5.3 percent. In the past four reports, total stocks rose 404 bcf, or 101 bcf per week, versus a 341 bcf adjusted build for the same one-month period last year and a 251-bcf five-year average gain for that period. Early injection estimates for next week's EIA report range from 17 bcf to 55 bcf versus a year-ago build of 26 bcf and a five-year average increase for that week of 23 bcf. Strong injections over the last seven weeks 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 of 3.84 tcf, before winter withdrawals begin.
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