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The August natural gas wholesale contract yesterday was lower by $0.033 as some moderation of the weather forecasts seems to be showing up on meteorologist’s weather prediction models. Instead of the scorching hotter than normal temperatures, forecasts are moderating to above normal temperatures. This caused some of the folks that were believing that prices would continue higher to put on the brakes yesterday and say to themselves, “we best slow our roll”. Estimates for today’s EIA storage number are Bentek calling for a build of 58 bcf, the BNP Paribas survey calling for a build of 61 bcf and PIRA calling for a build of 68 bcf while Reuter’s below is at a build of 62 bcf. Last year we saw a build of 55 bcf.
On the weather front, the millions of people enduring this week's extreme heat and humidity, it feels like they're living in a pressure cooker and in a sense, they are. Much of the United States is trapped under a heat "dome" caused by a huge area of high pressure that's compressing hot, moist air beneath it, leading to miserable temperatures in the mid-90s to low 100s and heat-index levels well above 100 degrees. The oppressive conditions extend from the northern Plains states to Texas and from Nebraska to the Ohio Valley and they're expanding eastward. "When a high pressure system develops in the upper atmosphere, the air below it sinks and compresses because there's more weight on top, causing temperatures in the lower atmosphere to heat up, according to meteorologists. The dome of high pressure also pushes the jet stream and its drier, cooler air, farther north, which is now well into Canada, while hot, humid air from the Gulf of Mexico circulates clockwise around the dome, traveling farther inland than normal. That also explains why temperatures in, say, North Dakota this week aren’t all that different from temperatures in Houston. The big difference is that people in Houston are accustomed to hot weather, while those in the north are not. "In places where the highest temperature you ever expect is in the 80s and you're at 102, there is going to be some issues.
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 62 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 50 bcf to 80 bcf. Storage rose an adjusted 55 bcf for the same week last year. The five-year average build for that week is 67 bcf. The median build in the survey was 61 bcf.
In last week's report, for the week ended July 8, overall storage climbed 84 bcf to 2.611 trillion cubic feet, well above the Reuters estimate of 76 bcf and the year-ago rise of 78 bcf but below the five-year average gain for that week of 88 bcf. The build trimmed the inventory shortfall relative to last year by 6 bcf to 218 bcf, or 8 percent, and left stocks 52 bcf, or 2 percent, below the five-year average. It was the fourth straight week that the inventory gap to year-ago levels has narrowed.
A total build this morning at the Reuters survey estimate would trim the shortfall relative to last year by 7 bcf to 211 bcf, or 7 percent, but increase the deficit to the five-year average by 5 bcf to 57 bcf, or 2 percent. In the past four reports, total stocks rose 355 bcf, or 89 bcf per week, versus a 298 bcf adjusted build for the same one-month period last year and a 331-bcf five-year average gain for that period. Early injection estimates for next week's EIA report range from 35 bcf to 55 bcf versus a year-ago build of 31 bcf and a five-year average increase for that week of 49 bcf. If weekly stock builds through October match the five-year average pace, inventories will begin next heating season with 3.551 tcf, 7.5 percent below last November's all-time high of 3.84 tcf and 1.4 percent below average for that time of year.
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