The Platts pre-report analyst survey suggests U.S. EIA data will show a 65 to 69 Bcf build to natural gas stocks for the latest reporting week

Washington - July 22, 2009

The U.S. Energy Information Administration (EIA) on Thursday is expected to report an addition of between 65 and 69 billion cubic feet (Bcf) to natural gas storage inventories for the week that ended July 17, according to a Platts survey of analysts.

An injection within those expectations would come in below last year's 87-Bcf build, and just above the five-year-average injection of 62 Bcf, according to EIA.

As a result, the year-on-year surplus -- 589 Bcf as of the week that ended July 10 -- will likely shrink, while the 454-Bcf surplus over the five-year average will likely expand marginally.

The wider range of analyst expectations spanned from inventory additions of 62 Bcf to 82 Bcf.

"Despite continued mild weather, injections are starting to diminish as indicated by the last few injections which have been lower than expectations," said Kent Bayazitoglu, director of market analytics at Gelber & Associates.

"This may indicate that lower prices are beginning to balance supply and demand," he said.

Ron Denhardt, vice president of natural gas services at Strategic Energy and Economic Research, said the supply-demand balance has tightened substantially during the last month.

"This suggests that production capacity and/or production shut-ins are reducing production," he said. "Still, with normal weather and no hurricane impact, we project working gas storage would reach about 4.05 Tcf by the end of October versus design capacity of 4.2 [trillion cubic feet] Tcf and estimated actual capacity of 3.8 Tcf to 3.9 Tcf."

Denhardt said unless there is substantial lost production from hurricanes or demand increase from warmer-than-normal weather, prices will have to fall further to cause further shut-in production.

"If [cooling degree days] were 10% greater than normal for the remainder of the summer, working gas storage would be reduced by 75 to 100 Bcf," Denhardt said.