The Platts pre-report analyst survey suggests U.S. EIA data will show a 48 to 52 Bcf addition to natural gas stocks for the latest reporting week

Washington - August 26, 2009

The U.S. Energy Information Administration (EIA) on Thursday is expected to report an addition of between 48 and 52 billion cubic feet (Bcf) to natural gas storage inventories for the week that ended August 21, according to a Platts survey of analysts.

For the same week last year, EIA estimated a 100-Bcf injection, while the five-year-average build stood at 67 Bcf. As a result, both the 562-Bcf surplus over last year and the 513-Bcf surplus over the five-year average likely would contract.

Analysts’ expectations for builds for the week that ended August 14 ranged between 38 Bcf and 57 Bcf. EIA estimated a 52-Bcf injection.

Many in the industry are growing increasingly concerned about the state of storage, which is already above 3.2 trillion cubic feet (Tcf) with over two months left in injection season. If the refill rate continues at its current pace, storage operators may be forced to curtail injections, leading to a glut of gas on the market and even lower prices, some fear.

"The gas market is running out of summer heat and, absent hurricane effects, will soon run out of storage capacity," said Stephen Smith, head of Stephen Smith Energy Associates. Excluding any potential producer shut-ins or injection curtailments, "gas storage continues to grow at a pace likely to approach 4 Tcf this fall," a level which is close to maximum storage capacity.

FirstEnergy Capital analyst Martin King believes plenty of gas was available for injections last week, with supply likely moving out of the near-full producing region into the eastern U.S. consuming region. He also pointed to "very aggressive" exports from Canada into the U.S., as Canada's own storage also is nearing maximum capacity.

In addition, the spread between near-term gas and back-month contracts on the NYMEX has offered considerable financial incentive to inject, he said. To that end, "we expect that storage operators, where and when they can, will take advantage of this structure, keeping storage injections relatively buoyant," King said.