19
Apr

Natural Gas Storage – Stats Update & Summer Price Deck Thoughts

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Gas Inventories Remain 22% Above The Five Year Average, But 13% Below Year Ago Levels.

  • Storage as of April 13, 2007: 1,546 Bcf (updated April 19, 2007).
  • Max storage for this week in history: 1,771 Bcf (2006). At present gas is at it’s 2nd highest level in history for this date.
  • We are now down 13% (225 Bcf) relative to year ago storage levels. Due to the withdrawal this past week versus the injection in the year ago comparable week we doubled up on the deficit to year ago storage from the prior week (see second chart below).
  • We are now above 22% (284 Bcf)  the 5 year average which includes 2006’s record levels (see third chart below).

Looking Ahead:

Here’s some quick stats for the period running from Tax day through the end of October (the traditional end of the injection season):

  • 5 Year Average Injections: 1,995 Bcf. Taken with current storage that scenario would put us at 3,541 Bcf in storage, or 91 Bcf over record storage.
  • Minimum Injections: 1,621 Bcf in 1999. This would yield storage of 3,167. While many consider the 3 Tcf mark to be full storage, 3,167 Bcf would be the lowest peak storage this decade and seen as extremely bullish for gas prices. 
  •  Maximum Injections: 2,513 Bcf in 2003. That year saw storage trough at a very low 642 Bcf. This won’t happen with this year’s much higher storage levels going into the injection season.
  • Last year we injected 1,674 Bcf into storage during this period.

In summary, I think that once heating degree days dissipate (within the timeframe of the next two reports), natural gas will suffer a little bout of seasonal weakness, potentially falling as low as $6.50 (may $6 if the weather stays Spring-like too long).

I’m setting aside thoughts of hurricane induced spikes and/or several consecutive weeks of excessive heat for now. Taking into account that while current Lower 48 production is up only slightly relative to 2006’s storm impacted volumes but that Canadian volumes are more than likely to decline more than LNG imports will increase I don’t see natural gas trading on average much above current levels of  $7.50 to $8 this summer. The well run E&P mint’s money at those levels.

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