Heating Season Ends With 1.569 Tcf in Storage

04.09.2007
Platt's Gas Daily

The traditional storage withdrawal season wrapped up with 1.569 Bcf of gas in the ground, the second-highest end-of-winter inventory on record, the Energy Information Administration reported Thursday.

For the week ending March 30, EIA posted a net injection of 58 Bcf, which exceeded consensus expectations of 47 to 52 Bcf. But the market shrugged off the data and rallied late (see story below).

"That pretty much indicates that the market is not being driven by the amount of gas in storage right now," said Donald Murry, an economist at C. H. Guernsey. "Every time someone says something about hurricanes, prices go up. And then there are the activities in the Middle East propping things up."

Citigroup Global Markets senior analyst Tim Evans said the weather has been "sufficiently inconsistent that we get bearish storage data when we get bullish weather and bullish storage data when we get bearish weather."

In the same week of 2006, EIA reported the highest season-ending storage inventory of 1.696 Tcf. As a result, the deficit from the year-ago level fell sharply to 127 Bcf from 209 Bcf a week ago, while the surplus over the five-year average of 1.232 Tcf shot to 337 Bcf from 267 Bcf.
In the East, inventories are now 118 Bcf above the five-year average, while stocks are 42 Bcf above the average in the West and 177 Bcf above in the producing region.

"The cold weeks this spring have moved us from the territory of a 'disastrous' spring glut to the range of 'just' a glut," said independent analyst Stephen Smith, adding that the 58-Bcf injection was "a bit of a surprise."

"We're in that part of the year where weather is less of a variable," Smith continued. "But with the price north of $7/MMBtu, we will stay attractive to LNG imports, and production has been strong, so there isn't a lot of remedy out there for that surplus from the five-year norm. We can't be bailed out by an extreme heat wave for a while."

Smith said he has been running models that predict working storage levels will rise to 2.4 to 2.5 Tcf by the end of June, assuming normal weather. At that point, the surplus over the 10-year average will remain at 600 Bcf, about where it is now, he added. "That's typical of the second quarter, when there's not a lot of demand."