The April natural gas exchange contract tested the $3.80 support again yesterday and traded below it briefly but it managed to hold up again settling at $3.818, down $0.055 on the day. The volume was moderate but overall, it was a sideways day as the market sits and waits for today’s EIA storage change number to be released. Estimates for the change are Bentek calling for a draw of 71 bcf, PIRA calling for a draw of 78 bcf and the BNP Paribas survey calling for a draw of 80 bcf while Rueter’s (see below) is at a withdrawal of 86 bcf. Last years change at this time of year was a draw of 124 bcf. The 6 to 15 day forecast is close to normal for the eastern half of the country as the winter season winds down. One other point to note is that the open interest for this product exploded higher on Tuesday up to over 982,000 contracts breaking the previous record of just over 976,000 contracts. Data posted on the CME Group website for Tuesday, March 1, showed natural gas wholesale contracts open interest, or the number of longs or shorts outstanding without offsets, climbed 21,659 contracts to a record 982,208 contracts, eclipsing the previous benchmark high of 976,934 set on July 23, 2008. Natural gas open interest has grown by a whopping 18 percent, or more than 150,000 contracts, over the last month, while prices have been locked in a fairly steady downtrend during that period, shedding some 12 percent.
On the electricity front this morning, power consumers in India would soon have prepaid electricity meters like prepaid cellphones instead of the smart meters that allow customers to have prepaid electricity accounts that have originated in the U.S. The new meters will help them pay for electricity in advance and use it in proportion to their payment. In the first phase of the project, 25,000 prepaid electricity meters would be installed. There are many bungalows and flats, which are used by owners only on weekends according to their company spokesperson. The prepaid scheme would be useful for them to control power expenses. Presently, they have to pay rent or in the Unites States, demand charges of power meters even if they are not living in their bungalows. He said due to prepaid meters, consumers can make advance payment and use power only when they need it. These meters have a facility to check how much power is consumed and how much money is spent. So, consumers would know in advance when they should recharge the meters. I wonder if this concept would take hold in the U.S.
As we do on every Thursday, we’ll discuss the storage levels on the rest of the commentary. U.S. natural gas inventory levels on average are expected to fall by 86 billion cubic feet when weekly data from the U.S. Energy Information Administration are released early this morning. In the weekly Reuters survey of 27 industry traders and analysts, withdrawal estimates for the week ended Feb. 25 ranged from 65 bcf to 110 bcf. Storage fell an adjusted 124 bcf for the same week last year. The five-year average decline for that week is 131 bcf.
In last week's report, for the week ended Feb. 18, overall storage fell 81 bcf, below the Reuters poll estimate of 85 bcf and well below the year-ago drop of 174 bcf and the five-year average decline for that week of 148 bcf. Total domestic gas inventories slid to 1.830 trillion cubic feet. The weekly draw sliced the deficit to last year by 93 bcf to 48 bcf, or 3 percent, and sharply cut the shortfall to the five-year average by 67 bcf to 61 bcf, or 3 percent.
A total draw this morning at the Reuters survey estimate would cut the deficit to last year by 38 bcf to just 10 bcf and trim the deficit to the five-year average by 45 bcf to 16 bcf. In the last four reports, total stocks fell 712 bcf, or 178 bcf per week, versus a 655 bcf adjusted drop for the same one-month period last year and a 622-bcf five-year average decline for that period. Early withdrawal estimates for next week's EIA report range from 70 bcf to 90 bcf versus a year-ago drop of 112 bcf and a five-year average decline for that week of about 107 bcf. If weekly withdrawals through March 31 match the five-year average pace, inventories will end the heating season at 1.506 tcf, 4 percent below average but still a comfortable level to start rebuilding stocks for next season.