Weekly DOE Natural Gas Storage Analysis

Injections in line with expectations

Injections in line with expectations – The EIA reported a natural gas injection of 58 bcf compared to market expectations (as per Bloomberg) of 57 bcf. This week’s injection was lower than the 68 bcf last year and the five-year average of 61 bcf. Total storage now stands at 3,164 bcf, or 6.4% below last year’s level of 3,382 bcf but 6% above the five-year average of 2,998 bcf. Natural Gas was trading a penny lower to US$3.80/mcf immediately following the release.

Futures curves keep coming down – The October gas contract has fallen 20% since the end of March despite a warmer than average summer and year to date storage injections 218 bcf (12%) below last year. We expect the near month contract will remain under pressure as robust rig counts support strong supply and demand is uncertain given broader economic concerns. Although the curve remains in contango, producers may have missed the opportunity to hedge incremental 2011 volumes above the US$5.50/mcf mark.