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The November natural gas market seemed to be coming to grips with the fact that today’s EIA storage change number will probably be much higher than last year and the 5 year average since it was lower by $0.127 settling at $3.489 on the day. Several estimates are the BNP Paribas survey calling for a build of 104 bcf, PIRA calling for a build of 105 bcf and Bentek calling for a build of 109 bcf while Reuter’s below is at an estimate of 102 bcf. Last year at this time we saw a build of 90 bcf and the 5 year average is a build of 72 bcf. The EIA today reported that production in the US in 2011 will increase to an all time high of 65.99 bcf per day and that daily demand will actually decline slightly to 67.23 bcf per day from 67.29. The 6 to 15 day forecast looks to be slowly cooling off in the plains states and the Northeast.
Yesterday, the energy department announced that a decline in U.S. manufacturing capacity is causing industrial demand for natural gas to grow at the slowest pace in three years, pushing down natural gas prices as production heads toward a record. Industrial gas use may rise 0.8 percent in 2012, the smallest gain since 2009, when consumption declined during the recession, Energy Department data show. Gas demand among manufacturers in 2012 will be 21 percent below the high reached in 1997, according to the department. U.S. capacity utilization, which measures the amount of an industrial plant in use, has dropped 12 percentage points since 1967, Federal Reserve data show. Factory payrolls have slid 40 percent since reaching a record in June 1979, while employment at service providers has jumped 74 percent, according to Labor Department data. “The growing service sector and increasing efficiencies in the manufacturing process are major factors that could ease industrial production” according to one analyst. Gas production may rise 6 percent this year to an all-time high of 65.99 billion cubic feet a day as output from shale formations gains, Energy Department estimates show. Prices have dropped 18 percent this year and declined 16 percent in the third quarter, the biggest drop since the first quarter of 2010.
It’s Thursday again, and we’ll focus the rest of the commentary on the storage levels. U.S. natural gas inventories are expected to have climbed by 102 billion cubic feet last week, a Reuter’s poll of industry traders and analysts showed on Wednesday. There were 26 participants in the Reuters poll, with injection estimates ranging from 83 bcf to 112 bcf.
In last week's report, for the week ended Sept. 30, overall storage climbed 97 bcf to 3.409 trillion cubic feet, slightly below the Reuters poll estimate of 99 bcf but well above the year-ago rise of 84 bcf and the five-year average gain for that week of 74 bcf. The build reduced the inventory shortfall relative to last year for the seventh time in eight weeks, trimming the total by 13 bcf to 78 bcf, or 2.2 percent. The storage deficit to a year ago has narrowed sharply from its June peak at 275 bcf, and most traders expect the gap to shrink further in coming weeks as mild autumn weather opens the door to a few more above average builds. The build last week also widened the surplus to the five-year average by 23 bcf to 28 bcf, or 1 percent. Two 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 trim the shortfall relative to last year by 12 bcf to 66 bcf, or 1.8 percent, and increase the surplus to the five-year average by 30 bcf to 58 bcf, or 1.7 percent.
In the past four reports, total stocks rose 384 bcf, or 96 bcf per week, versus a 331 bcf adjusted build for the same one-month period last year and a 296-bcf five-year average gain for that period. Early injection estimates for next week's EIA report range from 92 bcf to 125 bcf versus a year-ago build of 93 bcf and a five-year average increase for that week of 58 bcf. If weekly stock builds through October match the five-year average pace, inventories will begin next heating season with 3.631 tcf, 5.4 percent below last November's record high of 3.84 tcf but nearly one percent above average for that time of year. With about five weeks left in the stock building season, most analysts expect storage to peak this year above 3.7 tcf, but some, expecting at least a couple more triple-digit builds, do not rule out a challenge to last year's high.
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