In its most recent Short-term Energy Outlook, the Energy Information Administration (EIA) estimates that ending storage inventories on October 31, 2010, will be 3,810 billion cubic feet. “Our ending storage projections are very close to that level at 3,838 Bcf,” said Valerie Wood, President of Energy Solutions, Inc.
Triple-digit temperatures in the Northeast have impacted storage injections as the injection for the week ending July 9, 2010, was just 78 Bcf. Even so, that is a very reasonable injection level given the widespread heat. However, the market still reacted to a lower-than-estimated storage injection report. The August 2010 natural gas NYMEX contract gained $.26 per MMBtu within 15 minutes of the release of the report.
Wood explained, “This is a reminder of how volatile the market can be and how quickly it will respond to one piece of data if it is significantly different from market expectations.”
Looking ahead, natural gas storage inventories are still on pace to reach very high levels by October 31. There are still 16 weeks of injections remaining, and inventories are already at 2,840 Bcf. With the exception of last year, since 1994, inventories have never been this high this early in the injection season.
Ms. Wood concluded by saying, “More than adequate supplies and weaker demand due to a slower economy are helping to refill storage at record pace even with widespread heat. Rising inventories will keep prices from spiraling out of control this summer. Longer- term, as inventories reach record levels in the September-October timeframe, natural gas prices are expected to move toward $3.50 per MMBtu, barring significant supply disruptions from tropical storms or hurricanes.”
Additional information about market impacts from higher-than-expected natural gas inventories is discussed in the July Monthly Edition of The Advisor. Take a FREE 30-day trial to The Advisor and receive the most recent Weekly Edition, as well as the Monthly Edition for July, which contains additional insight into storage analyses. Learn more by visiting www.energysolutionsinc.com.
# # #
About Energy Solutions, Inc.
Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 50 years of experience in the natural gas industry, our team focuses on natural gas prices and in helping businesses improve their internal processes for the purchase of natural gas.
