Natural Gas Intelligence
Hefty EIA Storage Builds Expected; November Drops

Thursday, October 13, 2011

November futures plunged Wednesday as traders anticipate an inventory report to not only show additions to storage well above historical averages, but also surpass the record for October. At the close November had dropped 12.7 cents to $3.489 and December had shed 6.8 cents to $3.791. November crude oil fell 24 cents to $85.57/bbl.

Traders will have a chance to hone their estimates of storage supplies with the 10:30 a.m. EDT report by the Energy Information Administration on inventories for the week ended Oct. 7. If industry estimates are correct, the storage surplus relative to the five-year average will expand and the deficit to last year will contract.

Last year at this time 90 Bcf was injected and the five-year average is 72 Bcf. IAF Advisors of Houston forecasts a build of 106 Bcf and a Reuters poll of 26 industry players showed an average 102 Bcf with a range of 83 Bcf to 112 Bcf. Industry consultant Bentek Energy utilizing its North American flow model expects an increase of 109 Bcf.

"This will become the first three-digit injection that occurs during October when traditionally storage facilities start to report smaller injections in preparation for the winter season. The previous record high injection in October was 93 Bcf, reported last year for the week ended Oct. 10," Bentek reported.

Predictions carry risk and Bentek considers the 109 Bcf injection to have equal risk to the upside and downside this week. "Two of the largest facilities in the East Region, Dominion and Columbia Gas-TCO, reported significant losses week-on-week, which could lead to a smaller-than-forecasted build. On the other hand, the injections for the region remain strong across many other facilities in the region and with inventories still below historical levels, the injection could materialize into a larger build than currently forecasted."

For a complete copy of this report, please click here.