The July natural gas wholesale contract fell Wednesday only slightly as energy traders awaited the EIA report today on the ever-rising storage deficit in comparison to last year. The July natural gas contract settled lower by $0.004 at $4.577 on the day. Today’s eestimates for the EIA storage change number are Bentek calling for a build of 71 bcf, the BNP Paribas survey calling for a build of 68 bcf and PIRA calling for a build of 61 bcf while Reuter’s is calling for a build of 70 bcf (see below). Last year at this time we saw a build of 89 bcf. On the weather front, temperatures for the 6 to 15 day period are still above average but look to be slightly milder than earlier predicted. One other point to note is that a company called Celanese Corp. claims that they can produce ethanol from natural gas but the US renewable fuel standard says that the 15 billion gallons of ethanol that is blended into gasoline each year has to come from corn. It should be interesting to see how that fight plays out over time in Congress.
In Pennsylvania, PECO energy is offering $120 for residential customers that allows the utility to cycle their home air conditioners on and off during the hottest summer afternoons. Peco Energy Co. says 68,000 residential customers have signed up to receive these credits. Customers who enroll in the program permit Peco to install radio devices on their air conditioners that allow the utility to shut the units off for up to 15 minutes every half hour during "conservation events." Peco maintains that most customers will not experience discomfort from the slight increase in temperature because their air-conditioning systems will still operate, just not as intensely. Although Peco installed more than 10,000 devices last year and paid the promised credits, it has not yet actually declared a “conservation event” and reduced power to its customers. The utility hoped to sign up at least 100,000 customers eventually, to reduce peak demand sufficiently to meet state-mandated energy-conservation targets.
We’ll focus the rest of the commentary on the storage levels, as we do on every Thursday. U.S. natural gas inventories are expected to have gained 70 billion cubic feet last week, a Reuter’s poll of industry traders and analysts showed on Wednesday. There were 23 participants in the Reuters poll, with injection estimates ranging from 62 bcf to 83 bcf. Storage rose an adjusted 89 bcf for the same week last year. The five-year average build for that week is 87 bcf. In last week's report, for the week ended June 3, overall storage climbed 80 bcf to 2.187 trillion cubic feet, above the Reuters estimate of 78 bcf but well below the year-ago rise of 98 bcf and the five-year average gain for that week of 96 bcf. The build widened the inventory shortfall relative to last year by 18 bcf to 255 bcf, or 10 percent, and left stocks 58 bcf, or 3 percent, below the five-year average.
A total build this morning at the Reuters survey estimate would widen the shortfall relative to last year by 19 bcf to 274 bcf, or 11 percent, and extend the deficit to the five-year average by 17 bcf to 75 bcf, or more than 3 percent. In the past four reports, total stocks rose 360 bcf, or 90 bcf per week, versus a 366 bcf adjusted build for the same one-month period last year and a 381-bcf five-year average gain for that period. Early injection estimates for next week's EIA report range from 72 bcf to 93 bcf versus a year-ago build of 81 bcf and a five-year average increase for that week of 86 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 3.545 tcf in the ground, about 8 percent below last November's high and 2 percent below average for that time of year. To get inventories above last year's record by Nov. 1, weekly injections must average 76 bcf for the remaining 22 weeks of the stock building season, well above the five-year average of 62 bcf for that period.