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The September natural gas wholesale contract rallied throughout the day until the end of the session when sellers came in and sold it back down to almost unchanged, slightly higher for the day at $4.003, up $0.009 on the day. The big event today is that most analysts are calling for a storage build this week of 38 BCF while the over the counter market is trading the EIA storage figure at 33 bcf to 36 BCF. It seems that the whisper number (energy traders biases from where the reported analysts are in the market) is slightly above 40 bcf injection and we’ll see if power generation was up or down compared to last week via the hotter than normal weather experienced last week versus the week before. The trend for the storage reports have been coming in higher than expectations and natural gas has sold off on the report’s release and then stayed weak throughout the day of release.
On the drilling front this morning, natural-gas companies risk causing serious environmental damage from hydraulic fracturing unless they commit to the best engineering practices, a task force named by Energy Secretary Steven Chu concluded yesterday. Regulations to protect public health will work best when drillers embrace techniques that avoid “undesirable consequences,” according to a draft report by a subcommittee of the Secretary of Energy Advisory Board. The increased use of fracturing, or fracking, which forces water and chemicals into rock, raises the potential for a “serious problem,” the panel found. In fracturing, millions of gallons of chemically treated water and sand are forced underground to break up rock and allow gas to flow. Advances in the technology have, in a few years, pushed gas from shale to almost 30 percent of U.S. production from a “negligible amount,” according to the report”. To resolve the concerns, the panel recommended creating an industry organization “dedicated to continuous improvement” of practices, such as measuring and reporting air pollution, minimizing water use and improving well casing and cementing. While the report echoes industry’s claim of “remote” risks of fracturing fluids leaking into drinking water sources from deep-shale reservoirs, it said companies must engage “the range of issues concerning the public.” Public concerns extend to accidents and failures associated with poor well construction and operation, surface spills, leaks at pits and impoundments, truck traffic, and the cumulative impacts of air pollution, land disturbance and community disruption
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 climbed by 37 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 31 bcf to 48 bcf. Storage rose an adjusted 36 bcf for the same week last year. The five-year average build for that week is 37 bcf.
In last week's report, for the week ended July 29, overall storage climbed 44 bcf to 2.758 trillion cubic feet, above the Reuters estimate of 37 bcf and the year-ago gain of 29 bcf but below the five-year average increase for that week of 47 bcf. The build trimmed the inventory shortfall relative to last year by 15 bcf to 186 bcf, or 6 percent, but widened the gap to the five-year average by 3 bcf to 68 bcf, or 2 percent. It was the seventh straight week that the inventory gap to year-ago narrowed and the first week since mid-April that it dropped below 200 bcf. It peaked at 275 bcf on June 10.
A build this morning at the Reuters estimate would trim the shortfall relative to last year by 1 bcf to 185 bcf, or 6.2 percent, but leave the deficit to the five-year average unchanged at 68 bcf, or 2.4 percent. In the past four reports, total stocks rose 231 bcf, or 58 bcf per week, versus a 193 bcf adjusted build for the same one-month period last year and a 251-bcf five-year average gain for that period. Early injection estimates for next week's EIA report range from 49 bcf to 60 bcf versus a year-ago build of 28 bcf and a five-year average increase for that week of 43 bcf. If weekly stock builds through October match the five-year average pace, inventories will begin next heating season with 3.535 tcf, 7.9 percent below last November's record high of 3.84 tcf and 1.9 percent below average for that time of year.
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