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In the natural gas market yesterday, it seems that a day the July wholesale contract expiration and a day before a storage change report from the EIA is not a good combination to create any interest in this market. The August wholesale natural gas contract settled lower at $4.315 on the day, down three cents yesterday. Add to that the fact that we are coming up on a holiday weekend and it is not at all surprising that we were as quiet as we were. The estimates for the storage change are PIRA and Bentek calling for a 78 bcf build and the BNP Paribas survey calling for an 80 bcf build while Reuter’s below is at a 81 bcf storage injection. Even though the 6 to 15 day forecast continues to call for above average temperatures for the entire eastern half of the country, the production in the lower 48 states rose to its highest recorded level in 6 years. Production increased from 68.33 in March to 69.05 in April or 1.1% according to the EIA reported yesterday.
On the underbelly of successful deregulation this morning, Michigan Gas Utilities Corporation said that it, "will cease accepting new GCC [Gas Customer Choice] customer enrollments for one year," beginning September 1, 2011. During this "moratorium," Michigan Gas Utilities said that it will assess the appropriate amount of Gas Customer Choice customers and the associated volumes that its local distribution system can accommodate on a sustainable basis going forward. Michigan Gas Utilities announced the moratorium in rebuttal testimony in consolidated cases addressing its Gas Cost Recovery plan, its proposed reservation charge on choice suppliers. Choice sales have grown from 1% of non-transportation volumes in 2008 to an expected 33% by the end of the 2011-2012 GCR year.. Michigan Gas Utilities agreed that, "dramatic growth of the GCC program has created a new and currently challenging operating paradigm for the Company since the Choice program has grown so rapidly that it is increasingly difficult to balance the Company's system,", in other words the increasingly large proportion of Choice supply at the city gate, compared to GCR volumes, is affecting the Company's ability to balance its supply portfolio. We’ll continue to monitor this unfolding story.
As is customary on Thursday’s, we’ll focus the rest of the commentary on the storage levels. U.S. natural gas inventories are expected to have gained 81 billion cubic feet last week, a Reuter’s poll of industry traders and analysts showed on Wednesday. There were 22 participants in the Reuters poll, with injection estimates ranging from 66 bcf to 88 bcf. Storage rose an adjusted 63 bcf for the same week last year. The five-year average build for that week is 77 bcf.
In last week's report, for the week ended June 17, overall storage climbed 98 bcf to 2.354 trillion cubic feet, well above the Reuters estimate of 88 bcf, the year-ago rise of 81 bcf and the five-year average gain for that week of 86 bcf. The build trimmed the inventory shortfall relative to last year by 17 bcf to 258 bcf, or 10 percent, and left stocks 64 bcf, or 3 percent, below the five-year average.
A total build this morning at the Reuters survey estimate would narrow the shortfall relative to last year by 18 bcf to 240 bcf, or 9 percent, and slightly shrink the deficit to the five-year average by 4 bcf to 60 bcf, or 2.4 percent. In the past four reports, total stocks rose 330 bcf, or 83 bcf per week, versus a 358 bcf adjusted build for the same one-month period last year and a 368-bcf five-year average gain for that period. Early injection estimates for next week's EIA report range from 66 bcf to 82 bcf versus a year-ago build of 76 bcf and a five-year average increase for that week of 80 bcf. Storage ended March with 1.585 tcf in the ground, or about 1 percent below the five-year average, after a cold winter trimmed stocks from an all-time high of 3.84 tcf in early November.
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