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The natural gas market was slightly higher yesterday but in the big picture the movement was really sideways to slightly higher as has been the story all this week as energy traders await the next big piece of news that will be released this morning with the EIA storage number. The July natural gas exchange contract was higher by $0.016 to $4.846 yesterday and the Energy Department reported yesterday that they are predicting that production for 2011 will rise by 4.5% but that demand will only rise 1.4%. The weather is still showing much above average temperatures in the Midwest and East coast as well but it does not look as though that is going to last. Estimates for today’s EIA storage change number are Bentek calling for a build of 78 bcf, the BNP Paribas survey calling for a build of 77 bcf, and PIRA calling for a build of 74 bcf and Reuter’s below at 78 bcf while last year at this time we saw a build of 98 bcf. The natural gas market should react to the storage change number and any new changing weather updates.
As we do on most Thursday’s, we’ll focus the rest of the commentary on the storage levels. U.S. natural gas inventories are expected to have gained 78 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 68 bcf to 90 bcf. Storage rose an adjusted 98 bcf for the same week last year. The five-year average build for that week is 96 bcf. Those on the high side of estimates said the U.S. Memorial Day holiday last week likely slowed demand for air conditioning despite rising heat, with many schools and businesses closed for the holiday.
In last week's report, for the week ended May 27, overall storage rose 83 bcf to 2.107 trillion cubic feet, well below the Reuters estimate of 95 bcf, the year-ago increase of 90 bcf and the five-year average gain for that week of 99 bcf. The build widened the inventory shortfall relative to last year by 7 bcf to 237 bcf, or 10 percent, and left stocks 42 bcf, or 2 percent, below the five-year average. A total build this morning at the Reuters survey estimate would increase the shortfall to year-ago by 20 bcf to 257 bcf, or 11 percent, and extend the deficit to the five-year average by 18 bcf to 60 bcf, or nearly 3 percent.
In the past four reports, total stocks rose 350 bcf, or 88 bcf per week, versus a 361 bcf adjusted build for the same one-month period last year and a 375-bcf five-year average gain for that period. Early injection estimates for next week's EIA report range from 63 bcf to 73 bcf versus a year-ago build of 89 bcf and a five-year average increase for that week of 87 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 3.561 tcf in the ground, about 7 percent below last November's high but about average for that time. To get inventories above last year's record by Nov. 1, weekly injections must average 76 bcf for the remaining 23 weeks of the stock building season, well above the five-year average of 63 bcf for that period. In its June Short-Term Energy Outlook on Tuesday, the EIA said it expects inventories at the end of October to near a record high above 3.8 tcf due to high production and forecasts for a milder summer relative to last year's record heat.
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