FEB 10 MARKET UPDATE
STORAGE REPORT
This week’s EIA storage report for the week ending February 5, 2010:
This week’s withdrawal of: 191 Bcf
Leaving this week’s balance at: 2215 Bcf
This week’s balance last year: 2043 Bcf
This week’s balance, 5-yr average: 2101 Bcf
Natural gas inventories are 8.4% above this time last year and 5.4% above the five year average.
THOUGHTS ON THE MARKET
Natural gas remains range bound but the tendency for this time of year is toward lower prices once March arrives. The past decade, the average total winter withdrawals from storage have been 1.996 Tcf, while the average total summer withdrawals have been 2.069 Tcf. The highest winter withdrawal has been 2.530 in 02-03. So far this winter, we have withdrawn 1.622 Tcf.
If we continue to withdraw storage this winter at the current pace, we will exit the withdrawal season with a comfortable 1.289 Tcf in the ground. Last spring, we began the injection season with 1.651 Tcf (3rd highest) in storage. The implication is that we will not surpass last summer’s record high storage level but we will have plenty of gas available and gas prices will not be quite as low as 2009 on average.
Market sources say the current supply glut and the opening last year of two major interstate pipelines have combined to keep a lid on price volatility this winter despite periods of much-below-average temperatures. The Rockies Express Pipeline has helped bring more diversified supply to premium market areas. Of the past four winters, price volatility has been lowest this year.
With the current 2011 gas strip trading around its lowest level since Jan ’09 ($6.15/MMBtu) drilling should continue to be incentivized, which is likely to increase domestic gas production further. Oil ended last week higher amid a decline in the dollar, cold weather boosting demand in the Northeastern U.S., and higher demand forecasts from the International Energy Agency.