Cash prices overall advanced on average of about 9 cents Thursday, and futures settled at the highest point since December 2011. Particular strength was noted in the Midwest and eastern prices rose as cooler temperatures were forecast. California and West Coast prices firmed following repairs to a compressor station.
The Energy Information Administration reported that 72 Bcf was injected into underground storage, less than what traders were expecting, and prices advanced. At the close of futures trading, November had added 12.9 cents to $3.604 and December had risen 11.7 cents to $3.900. November crude oil gained 82 cents to $92.07/bbl.
Midwest generators expounded on the current debate over coal-to-gas switching. Coal-fired generation and natural gas-fired generation may not be as closely linked as some analysts have intimated. This could have strong implications as to whether the rise in natural gas prices is indeed capped by the price of coal.
"I don't think it's that directly linked," said a Wisconsin utility manager. "It's really just a function of what's the input price and what is the market bearing. The market price [power] is really what drives whether the unit is running or not. Each unit needs a certain cash flow.
Will storage end the season above the 4.0 Tcf mark? It's going to be close. At present natural gas inventories stand at 3,725 Bcf, and with three weeks left in the traditional injection season it will take builds of 92 Bcf a week to make it. The kicker is that injections will often continue into November making the 4.0 Tcf mark actually feasible.
Prior to the release of the 10:30 a.m. storage report, all indications were that this week's build report would fall a little short. Most estimates were close to last week's reported 77 Bcf increase, and United ICAP calculated a gain of 73 Bcf. Ritterbusch and Associates was looking for a build of 77 Bcf, and Bentek Energy calculated a gain of 76 Bcf. Last year 108 Bcf was injected, and the five-year average is for a build of 84 Bcf.
Analysts at Energy Metro Desk (EMD) figured that "if weekly injections through early mid-November match the five-year average, the end tally will be in the 3.960 Tcf neighborhood, or almost 3% above last year's record high of 3.852 Tcf but 6.7% below the newly expanded 4.239 Tcf capacity estimate EIA announced last month." Either way it is a boatload of gas.
EMD's final weekly survey estimated a build of 78 Bcf from a poll of 37 analysts. The range was from 70 Bcf to 98 Bcf.
Bentek said "The risk to this week's forecast is to the high side. The colder temperatures predicted for this week did not arrive until the end of the period, suggesting that residential and commercial demand was overestimated and allowed for additional injections."
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